Scandinavian Working Papers in Economics
Working Papers,
Lund University, Department of Economics
No 2018:13: Participation and Losses in Multi-Level Marketing: Evidence from an FTC Settlement
Claes Bäckman () and Tobin Hanspal ()
Additional contact information
Claes Bäckman: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Tobin Hanspal: Research Center SAFE, Goethe University, Frankfurt, Germany
Abstract: More than 20 million Americans are affiliated with Multi-Level Marketing firms (MLMs), but there is little empirical evidence on who participates in this controversial part of today's labor market. We link data on 350,000 individuals cited in an FTC settlement with one of the largest MLMs to detailed county-level information. We find that participation is greater in areas with higher median income and where women are absent from the labor market, suggesting value in flexible work. However, losses are correlated with higher inequality and lower social capital, suggesting that the pitfalls accrue to vulnerable groups.
Keywords: Multi-level marketing; Alternative work; Consumer financial protection
29 pages, First version: May 30, 2018. Revised: August 22, 2019.
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