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

JEL-codes: J21; J22; L26

29 pages, First version: May 30, 2018. Revised: August 22, 2019.

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