Labor Market Power in Developing Countries: Evidence from Colombian Plants

33 Pages Posted: 28 May 2021

See all articles by Francesco Amodio

Francesco Amodio

McGill University

Nicolás de Roux

Universidad de los Andes - Department of Economics

Date Written: May 19, 2021

Abstract

How much can employers in low and middle-income countries suppress wages below marginal productivity? Using plant and customs data from Colombia, we exploit predetermined variation across plants in sales export destination combined with variation in exchange rates to generate plant-specific shocks to marginal revenue productivity and labor demand. We estimate a firm-level labor supply elasticity of around 2.5, implying that workers produce about 40% more than their wage level. Our results indicate that Colombian and US manufacturers have a comparable degree of labor market power.

Keywords: labor market power, export, Colombia

JEL Classification: J42, L10, O14, O54

Suggested Citation

Amodio, Francesco and de Roux, Nicolás, Labor Market Power in Developing Countries: Evidence from Colombian Plants (May 19, 2021). Documento CEDE No. 27, Available at SSRN: https://ssrn.com/abstract=3854185 or http://dx.doi.org/10.2139/ssrn.3854185

Francesco Amodio (Contact Author)

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada

Nicolás De Roux

Universidad de los Andes - Department of Economics ( email )

Carrera 1a No. 18A-10
Bogota, AA4976
Colombia

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