Labor market monopsony power in the manufacturing sector of four Sub-Saharan African countries

Abstract

We estimate labor market monopsony power among manufacturing firms in four Sub-Saharan African countries using a parametric production function approach on panel dataset. Pooled estimate suggests that wages are approximately 38 percent of the marginal revenue product of labor, implying a labor supply elasticity of 0.62. Nonparametric robustness checks indicate these results are robust to concerns over parametric model misspecification. Departure from competitive labor market leads to approximately 50.80 percent higher employer rent, 75.61 percent lower employee rent, and 15.95 percent deadweight loss. Overall, our results are suggestive of monopsonistic labor markets.