Global Labor Market Power

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: RF Berlin - CReAM Discussion Paper Series ; No. 04/24

Classification and Topics

• Classification: Wirtschaft ; Demand and Supply of Labor: General ; Wages, Compensation, and Labor Costs: General ; Monopsony; Segmented Labor Markets ; Production, Pricing, and Market Structure; Size Distribution of Firms
• Subject: labor market power ; self-employment ; development ; labor market institutions

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Amodio, Francesco ; Brancati, Emanuele ; Brummond, Peter ; de Roux, Nicolas ; Di Maio, Michele
• Event: Veröffentlichung
• (who): Rockwool Foundation Berlin (RF Berlin) and Centre for Research & Analysis of Migration (CReAM)
• (where): Berlin and London
• (when): 2024

Further information

• Last update: 10.03.2025, 11:45 AM CET