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Global Labor Market Power

Author

Listed:
  • Amodio, Francesco

    (McGill University)

  • Brancati, Emanuele

    (Sapienza University of Rome)

  • Brummund, Peter

    (University of Alabama)

  • de Roux, Nicolás

    (Universidad de los Andes)

  • Di Maio, Michele

    (Sapienza University of Rome)

Abstract

We estimate the labor market power of over 13,000 manufacturing establishments across 82 low and middle-income countries around the world. Within local labor markets, larger and more productive firms have higher wage markdowns and pay lower wages. Labor market power across countries exhibits a mild non-linear relationship with GDP per capita, entirely driven by a strong hump-shaped relationship with the share of self-employed workers. Labor market institutions fully account for the hump shape: in countries with unemployment protection, wage markdowns increase with the share of self-employment while the opposite is true in countries without it. We explain this finding through the lens of a simple oligopsonistic labor market model with frictions. Self-employment prevalence correlates with the elasticity of labor supply to the wage paid, and labor market institutions can change the sign of this relationship.

Suggested Citation

  • Amodio, Francesco & Brancati, Emanuele & Brummund, Peter & de Roux, Nicolás & Di Maio, Michele, 2024. "Global Labor Market Power," IZA Discussion Papers 16823, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp16823
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    References listed on IDEAS

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    More about this item

    Keywords

    labor market power; self-employment; development; labor market institutions;
    All these keywords.

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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