Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/162138
Authors: 
Goerke, Laszlo
Neugart, Michael
Year of Publication: 
2017
Series/Report no.: 
IAAEU Discussion Paper Series in Economics 04/2017
Abstract: 
A large body of evidence suggests that social comparisons matter for workers' valuation of the wage they receive. The consequences of social comparisons in imperfectly competitive labor markets are less well understood. We analyze an oligopsonistic model of the labor market where workers derive (dis-) utility from comparing their own wage with wages paid at other firms. As social comparisons become more preva lent all workers are paid higher wages, the wage distribution becomes more equal, and employment shifts to high productivity firms. Moreover, the total wage bill and output increase, while aggregate profits decline. Overall welfare rises. Our theoretical results have implications for estimating the elasticity of the labor supply curve facing a firm.
Subjects: 
social comparisons
status seeking
oligopsony
wage distribution
functional income distribution
welfare
JEL: 
D62
J22
J42
Document Type: 
Working Paper

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