Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/295846 
Year of Publication: 
2024
Series/Report no.: 
IZA Discussion Papers No. 16823
Publisher: 
Institute of Labor Economics (IZA), Bonn
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.
Subjects: 
labor market power
self-employment
development
labor market institutions
JEL: 
J20
J30
J42
L11
Document Type: 
Working Paper

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