Global labor market power
Amodio, Francesco ; Brancati, Emanuele ; Brummund, Peter ; de Roux, Nicolas ; Di Maio, Michele
Institute of Labor Economics, Bonn
IZA - Bonn
2024
46 p.
labour market ; labour market policy ; wages ; self employment
Discussion Paper
16
Labour market
https://docs.iza.org/dp16823.pdf
English
Bibliogr.
"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."
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