Labor Market Power in Developing Countries: Evidence from Colombian Plants

32 Pages Posted: 29 May 2021

See all articles by Francesco Amodio

Francesco Amodio

McGill University

Nicolás de Roux

Universidad de los Andes - Department of Economics

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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 pre- determined 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.

JEL Classification: J42, L10, O14, O54

Suggested Citation

Amodio, Francesco and de Roux, Nicolás, Labor Market Power in Developing Countries: Evidence from Colombian Plants. Available at SSRN: https://ssrn.com/abstract=3855954 or http://dx.doi.org/10.2139/ssrn.3855954

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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