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Social comparisons in Oligopsony

Author

Listed:
  • Laszlo Goerke

    () (Institute for Labour Law and Industrial Relations in the European Union, Trier University)

  • Michael Neugart

    () (Technische Universität Darmstadt)

Abstract

A large body of evidence suggests that social comparisons matter for workers' valuation of the wage they receive. The consequences of so- cial 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 rms. 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. More- over, 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.

Suggested Citation

  • Laszlo Goerke & Michael Neugart, 2017. "Social comparisons in Oligopsony," IAAEG Discussion Papers until 2011 201704, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
  • Handle: RePEc:iaa:wpaper:201704
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    References listed on IDEAS

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    More about this item

    Keywords

    social comparisons; status seeking; oligopsony; wage distribution; functional income distribution; welfare;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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