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...

Wages and employment are too low in a monopsony. Furthermore, a minimum wage or a subsidy may raise employment up to its first-best level. First, we analyze whether these important predictions still hold if workers compare their income to that of a refer- ence group. Second, we show that the...