DP16180 Labor Market Power in Developing Countries: Evidence from Colombian Plants
|Author(s):||Francesco Amodio, Nicolas De Roux|
|Publication Date:||May 2021|
|Keyword(s):||Colombia, export, labor market power|
|JEL(s):||J42, L10, O14, O54|
|Programme Areas:||Labour Economics, Industrial Organization, Development Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=16180|
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.