efficient non contractible investments in large economies abstract do investors making complementary investments face the correct incentives especially when they cannot contract with each other prior to their decisions we present a two sided matching model in which buyers and sellers make investments prior to matching once matched buyer and seller bargain over the price taking into account outside options efficient decisions can always be sustained in equilibrium we characterize the inefficiencies that can arise in equilibrium and show that equilibria will be constrained efficient we also show that the degree of diversity in a large market has implications for the extent of any inefficiency journal of economic literature classification numbers c78 d41 d51

assortative matching with explicit search costs in this paper i analyze a decentralized search and matching economy with transferable utility composed of heterogeneous agents i explore whether becker s assortative matching result generalizes to an economy where agents engage in costly search in an economy with explicit additive search costs complementarities in joint production supermodularity of the joint production function lead to assortative matching this is in contrast to previous literature which had shown that in a search economy with discounting assortative matching may fail even when the joint production function is supermodular

birth rates and the vietnam draft during the vietnam conflict over 8 million americans served in the armed forces and almost 3 5 million were deployed to southeast asia department of veterans affairs the war is considered by some to be the defining event of that generation not just because of the number of troops deployed the largest since the second world war but because of how it affected all men of that generation those who served as well as those who were able to avoid service while a large literature has examined effects of the draft on postwar outcomes for veterans effects of the wartime mobilization on family formation during the time of the conflict have been largely ignored the mobilization led to the absence of a large number of young men from local marriage markets and this shock to sex ratios could have significantly disrupted normal family formation patterns including assortative matching and fertility behavior 1 in this paper we exploit variation across states and over time on vietnam era inductions to analyze the effects of the wartime mobilization on

the terms of trade and the current account the harberger laursen metzler effect the paper examines the effect of terms of trade changes on a small country s spending and current account assuming optimizing behavior in an intertemporal framework with perfect international capital mobility a temporary future terms of trade deterioration implies a deterioration improvement of the trade balance whereas a permanent terms of trade deterioration has an ambiguous effect depending on the rate of time preference nominal and real variables are considered via exact price indexes two periods and an infinite horizon are examined

on the emergence of toyboys the timing of marriage with aging and uncertain careers we explore how gender bias in career opportunities affects matching in a marriage market with search frictions and where an individual s fitness decays with age we document a being left on the shelf effect where young singles who find the marriage market rapidly thins with age rush into early partnership singles with stronger career opportunities however have a greater option value to defer marriage more equal career opportunities for women captured by greater schooling and better occupations potentially explain the recent emergence of toyboy unions in which the woman is at least 5 years older than her partner 2011 by the economics department of the university of pennsylvania and the osaka university institute of social and economic research association

macro economic aspects of the effectiveness of foreign aid on the two gap model home goods disequilibrium and real exchange rate misalignment we construct an open economy disequilibrium model to assess the welfare effects of aid in different macroeconomic regimes aid is shown to have different effects in different unemployment regimes because it increases the social costs of wage price rigidities in the classical regime but decreases them in the keynesian unemployment regime a link is made with the two gap model but we highlight the role of real exchange rate misalignment failure to clear the nt goods market

search and the efficient assignment of workers to jobs in a model in which different types of workers form matches with different types of employers a method of calculating opportunity costs of workers and jobs is derived these are shown to differ systematically from the reservation wages and profits used by workers and employers to determine whether matches should be formed ex ante differences among workers and among jobs then generate externalities in the labor market resulting in inefficient assignments of workers to jobs and multiple equilibria intervention in the labor market by altering the assignment can increase aggregate output but may cause regressive redistribution copyright 1995 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

on complicated dynamics in simple monetary models we provide a complete characterization of stationary and nonstationary deterministic equilibria in search models of liquidity with indivisible assets two formulations are considered the usual one with random search and bargaining and a less common but arguably better one with directed search and posting also we consider general meeting technologies this is interesting because some results are easy with the particular technologies in previous studies but not in general as is known these models have equilibria where endogenous variables change over time as self fulfilling prophecies more surprisingly we prove there are no equilibria where they cycle in the long run

business cycles and the exchange rate system some international evidence this paper investigates the differences in time series behavior of key economic aggregates under alternative exchange rate systems we use a postwar sample of 49 countries to compare the behavior of output consumption trade flows government consumption spending and real exchange rates under alternative exchange rate systems pegged floating and cooperative systems such as the ems we then examine evidence from two particular episodes involving canada and ireland of changes in the exchange rate system aside from greater variability of real exchange rates under flexible than under pegged nominal exchange rate systems we find little evidence of systematic differences in the behavior of macroeconomic aggregates or international trade flows under alternative exchange rate systems these results are of interest because a large class of theoretical models implies that the nominal exchange rate system has important effects on a number of macroeconomic quantities

education matching and the allocative value of romance societies are characterized by customs governing the allocation of non market goods such as marital partnerships we explore how such customs affect the educational investment decisions of young singles and the subsequent joint labour supply decisions of partnered couples we consider two separate matching paradigms for agents with heterogeneous abilities one where partners marry for money and the other where partners marry for romantic reasons orthogonal to productivity or debt these generate different investment incentives and therefore have a real impact on the market economy while marrying for money generates greater investment efficiency romantic matching generates greater allocative efficiency since more high ability individuals participate in the labour market the analysis offers the possibility of explaining cross country differences in educational investments and labour force participation based on matching regimes

pre match investment with frictions the paper explores an environment in which agents are motivated to make unproductive investments with the sole aim of improving their matching opportunities in contrast to existing work i add frictions by allowing the investment to be imperfectly observed the analysis allows for a deeper understanding of the trade off inherent in related models investments waste resources but facilitates more efficient matching patterns i show that greater frictions i do not always lead to inferior matching patterns and ii can force the economy into to a pareto preferred equilibrium

the role of social norms in a model of marriage and divorce in the us the rate of divorce has increased at an alarming rate since the 1960s this paper presents a mechanism which gives rise to the emergence of multiple equilibria and a discrete jump in the rate of divorce in a simple search environment we attempt to show that social norms influence the way each agent searches for a matching partner and hence the probability of divorce in a low divorce equilibrium agents are willing to spend more cost in the search process as a result the act of divorce becomes a more accurate signal of unobservable characteristics of a divorced agent this type of social norms is self consistent in equilibrium as social stigma attached to divorce is relatively high and this forces agents to be more discreet in the search process for exactly the opposite reason a high divorce equilibrium can also be supported where agents are willing to spend little cost in the search process in the light of this logic the rapid increase in the rate of divorce can be seen as a movement from a low divorce to a high divorce equilibrium possibly triggered by a temporary shock

does competition solve the hold up problem in an environment in which heterogeneous buyers and sellers undertake ex ante investments the presence of market competition for matches provides incentives for investment but may leave inefficiencies namely hold up and coordination problems this paper shows using an explicitly non cooperative model that when matching is assortative and investments precede market competition buyers investments are constrained efficient while sellers marginally underinvest with respect to what would be constrained efficient however the overall extent of this inefficiency may be large multiple equilibria may arise one equilibrium is characterized by efficient matches but there can be additional equilibria with coordination failures

on the state of the union an overlapping generations model of marriage and divorce is constructed to analyze family structure and intergenerational mobility agents differ by sex marital status and human capital single agents meet in a marriage market and decide whether to accept or reject proposals to wed married couples must decide whether to separate or not parents invest in their children depending on their wherewithal a simulated version of the theoretical prototype can generate an equilibrium with a significant number of female headed families and a high degree of persistence in income across generations to illustrate the model s mechanics the effects of two antipoverty policies namely child support and welfare are investigated

the effect of male wage inequality on female age at first marriage a model in which women search for husbands characterized by their wages predicts increasing within group male wage inequality raises the expected value of continued marital search and so lowers female marriage propensities using 1970 1980 and 1990 census data i test this hypothesis within geographically racially and educationally defined marriage markets the estimates suggest rising male wage inequality accounted for 7 to 18 of the decline in the propensity to marry between 1970 and 1990 for white women and more educated black women growing wage inequality appears to have had little effect on the marriage behavior of less educated black women

decentralized matching and social segregation social segregation is a ubiquitous feature of human life people segregate along the lines of income religion ethnicity language and other characteristics this study provides the first experimental examination of decentralized matching with search frictions and institutionalized segregation the findings indicate that without a segregation institution high types over segregate relative to the equilibrium prediction we observe segregation attempts even when equilibrium suggests that everyone should accept everyone else in the presence of a segregation institution we find that while the symmetric segregation institution increases matching success rate and efficiency in one environment it has weak or no effect in a steep incentive environment by adding an entry cost to a flat incentive market however the asymmetric segregation institution leads to an increased matching success rate and efficiency in both environments which underscores the importance of a coordination device

when do long run identifying restrictions give reliable results many recent articles have identified behavioral disturbances in vector autoregressions by imposing restrictions on the long run effects of shocks this article demonstrates that this approach will be unreliable unless the underlying economy satisfies three types of strong restrictions although many aspects of these issues have been raised before this article draws out and illustrates the implications for inferences under the long run scheme furthermore it provides strategies for dealing with the problems

a finite decentralized marriage market with bilateral search abstract i study a model in which a finite number of men and women look for future spouses via random pairwise meetings the central question is whether equilibrium marriage outcomes are stable matchings when search frictions are small the answer is they can but need not be for any stable matching there is an equilibrium leading to it almost surely however there may also be equilibria leading to an unstable matching almost surely a restriction to simpler strategies or to markets with aligned preferences rules out such equilibria however unstable even pareto dominated matchings may still arise with positive probability under those two restrictions combined in addition inefficiency due to delay may remain significant despite vanishing search frictions finally a condition is identified under which all equilibria are outcome equivalent stable and efficient

cities matching and the productivity gains of agglomeration abstract the striking geographical concentration of economic activities suggests that there are substantial benefits to agglomeration however the nature of those benefits remains unclear in this paper we take advantage of a new data set to quantify the role of one of the main contenders the matching of workers and jobs we show that thicker urban labor markets are associated with more assortative matching in terms of worker and firm quality when we estimate establishment level production functions we also find evidence of complementarities between worker and firm quality putting together the production and matching relationships we show that production complementarity and assortative matching is an important source of the urban productivity premium

unravelling of dynamic sorting we consider a two sided finite horizon search and matching model with heterogeneous types and complementarity between types the quality of the pool of potential partners deteriorates as agents who have found mutually agreeable matches exit the market when search is costless and all agents participate in each matching round the market performs a sorting function in that high types of agents have multiple chances to match with their peers however this sorting function is lost if agents incur an arbitrarily small cost in order to participate in each round with a sufficiently rich type space the market unravels as almost all agents rush to participate in the first round and match and exit with anyone they meet copyright 2005 wiley blackwell

household formation inequality and the macroeconomy this paper examines how family structure can influence the macroeconomy it uses a simple model where the key features are taken as exogenous and shows that the sorting of individuals into families can have important quantitative effects on human capital formation inequality and income it then discusses how these features can be endogenized and suggests avenues

discrimination in matchmaking evidence from the price policy of a french marriage bureau this article shows how a matchmaking agency may improve the quality of serious meetings between individuals seeking long term relationship thanks to a price discrimination policy its filtering is based on objective and official characteristics sex age and contract s environment and on implicit criteria the few asked characteristics by its clients

truthtelling in matching markets we analyze a search and matching model with non transferable utility and asymmetric information randomly paired agents go through an evaluation phase at the end of which they discover each other s types and choose to match or not before deciding to enter this phase agents can communicate through cheap talk we provide conditions for this communication to be informative and we examine how it affects agents welfare we show that communication is pareto improving only when the matching is assortative in the absence of communication and left unchanged by information transmission

targeted search with horizontal differentiation in the marriage market abstract we develop a search matching model in the marriage market with heterogeneous men a continuum of types and heterogeneous women a finite number of types the model has two distinguishing features first men and women are also horizontally differentiated second the search is targeted each type of woman constitutes a distinctive submarket and men are able to choose beforehand in which submarkets to participate but the search is random within each submarket we show that there is always a unique equilibrium in which men are endogenously segmented into different submarkets and that the equilibrium matching pattern is weakly positive assortative we then explore how the equilibrium marriage pattern changes horizontally and vertically as some exogenous shocks occur in particular we show that an internet induced increase in search efficiency would make the marriage pattern overall more assortative while an increase in the dispersion of the horizontal match fitness could make the marriage pattern overall less assortative

a spillover based theory of credentialism i propose a model in which credentials such as diplomas are instrumentally valuable to workers the model avoids an important criticism of standard job market signalling models by tying a worker s wage to their output a worker s productivity is influenced by the skills of their co workers where such skills arise from an ability augmenting investment that is made prior to matching with co workers credentials allow workers to demonstrate their investment to the labour market thereby allowing them to match with high skill co workers in equilibrium despite the positive externality associated with a worker s investment i show how overinvestment is pervasive in equilibrium

marriage and class here we consider a matching model where agents are heterogeneous and utilities nontransferable we utilize this framework to study how equilibrium sorting takes place in marriage markets we impose conditions that guarantee the existence of a steady state equilibrium and then characterize it several examples are developed to illustrate the richness of equilibria the model reveals an interesting sorting externality that can support multiple steady state equilibria even with constant returns to matching excerpt

matching with noise and the acceptance curse abstract this paper explores matching with both search and information frictions specifically everyone observes only a noisy signal of the true type of any potential mate in this context matching decisions must incorporate not only information about a partner s attribute conveyed by the noisy signal but also as in the winner s curse in auction theory information about a partner s type contained in his or her acceptance decision we show that there exists an equilibrium exhibiting a stochastic positive assorting of types generalizing becker j polit economy 81 1973 813 846 in equilibrium selection is adverse being accepted reduces an agent s estimate of a potential partner s type a phenomenon that we call the acceptance curse effect

transplants and implants the economics of self improvement this article examines equilibrium self improvement and marriage proposal strategies in a two sided search model with nontransferable utility singles are vertically differentiated some make better marriage partners than others a complete characterization of equilibrium is provided it is shown there are two externalities to self improvement decisions further these externalities may support multiple pareto rankable equilibria by encouraging everybody to self improve society can create a situation where everybody is forced to improve to remain acceptable but a preferred equilibrium may exist where there is less costly self improvement

inefficient sorting under output sharing abstract i study sorting in a frictional market asset owners post their terms then workers direct their search when the owners switch from prices to shares the competition between workers is handicapped the unique equilibrium features inefficient positive assortative matching the queue lengths are distorted even though the hosios efficiency condition holds for every pair of types for any distribution of types all workers pair up with better assets the best workers suffer while the weakest workers gain the opposite occurs on the asset side competition drives the asset owners to post flatter contracts it leads to constrained efficiency whenever prices are feasible otherwise handicapped competition results in inefficient sorting

matching and sorting in online dating using data on user attributes and interactions from an online dating site we estimate mate preferences and use the gale shapley algorithm to predict sta ble matches the predicted matches are similar to the actual matches achieved by the dating site and the actual matches are approximately efficient outof sample predictions of offline matches i e marriages exhibit assortative mating patterns similar to those observed in actual marriages thus mate pref erences without resort to search frictions can generate sorting in marriages however we underpredict some of the correlation patterns search frictions may play a role in explaining the discrepancy

stable marriages and search frictions stable matchings are the primary solution concept for two sided matching markets with nontransferable utility we investigate the strategic foundations of stability in a decentralized matching market towards this end we embed the standard marriage markets in a search model with random meetings we study the limit of steady state equilibria as exogenous frictions vanish the main result is that convergence of equilibrium matchings to stable matchings is guaranteed if and only if there is a unique stable matching in the underlying marriage market whenever there are multiple stable matchings sequences of equilibrium matchings converging to unstable inefficient matchings can be constructed thus vanishing frictions do not guarantee the stability and efficiency of decentralized marriage markets

smart dating in speed dating how a simple search model can explain matching decisions abstract how do people in a romantic matching situation choose a potential partner we study this question in a new model of matching under search frictions which we estimate using data from an existing speed dating experiment we find that attraction is mostly in the eye of the beholder and that the attraction between two potential partners has a tendency to be mutual these results are supported by a direct measure of subjective attraction we also simulate the estimated model and it predicts rejection patterns matching rates and sorting outcomes that fit the data very well our results are consistent with the hypothesis that people in a dating environment act strategically and have at least an implicit understanding of the nature of the frictions and of the strategic equilibrium

mexico and the brady plan mexico has throughout the 1980s been centre stage in the debates and events shaping the sovereign debt problem caught between a sudden collapse of its terms of trade and rising world interest rates mexico suspended debt service payments in august 1982 and ushered in what has since become known as the debt crisis in the following years lending to ldcs dried up and debtor countries were increasingly forced to run high trade surpluses to effect ever growing transfers from poor back to rich countries in the face of falling growth rates and rising inflation in the high debt countries then secretary of the treasury baker proposed the baker plan in return for economic reforms high debt countries would get new access to medium term new loans in addition to rolling over of amortization of old loans new loans had to come both from commercial creditors and the official lending institutions with access to capital markets restored the economic reforms would it was hoped allow the debtors to grow out of debt but experience in the high debt countries showed that the original hopes of the proponents of the baker plan went unfulfilled net transfers out of the borrowing countries went up rather than down as

a theory of self selection in a market with matching frictions an application to delay in refereeing times in economics journals abstract a matching market with imperfect information is studied with imperfect information it is shown that friction in a meeting process can facilitate self selection and thus may improve the matching outcome as an application the effect of delay in refereeing time on publication outcome is analyzed in a publication process in economics journals though the delay causes efficiency loss by postponing the dissemination of new research it will better sort the papers to each journal by their qualities by preventing mediocre papers from being submitted to a prestigious journal and published by luck if an assortative outcome good papers in prestigious journals and mediocre papers in less prestigious journals is efficient the delay may actually improve the publication outcome other matching market examples are also discussed

measuring the economic impact of monetary union the case of okinawa data from okinawa s monetary union with the united states in 1958 and with japan in 1972 are used to obtain a quantitative indication of how monetary union might affect the behavior of nominal and real shocks across two economies with monetary union the variance of the real exchange rate between two economies declines and their business cycle linkage becomes stronger a var analysis of output and price data for okinawa and japan further indicates that the contribution of asymmetric nominal shocks in business cycles becomes smaller monetary union thus seems to facilitate both nominal and real convergence

pre matching gambles abstract this paper investigates pre matching gambles and provides a new reason to gamble matching concerns examples of pre matching gambles include occupational choices before the marriage market college major choices before the labor market and portfolio management before attracting future clients in the financial market i show that people make risky investments they would not have made if not for their subsequent participation in a competitive matching market a fundamental and unique feature of the competitive matching market which i call the competitive matching effect induces gambling the paper also illustrates the relationship between social efficiency and inequality in this setting and shows how progressive taxation eliminates social inefficiency reduces inequality and generates government revenue

why dowry payments declined with modernization in europe but are rising in india in contrast to most dowry oriented societies in which payments have declined with modernization those in india have undergone significant inflation over the last five decades this paper explains the difference between these two experiences by focusing on the role played by caste the theoretical model contrasts caste and non caste based societies in the former there exists an inherited component to status caste that is independent of wealth and in the latter wealth is the primary determinant of status modernization is assumed to involve two components increasing average wealth and increasing wealth dispersion within status or caste groups the paper shows that in caste based societies the increases in wealth dispersion that accompany modernization necessarily lead to increases in dowry payments whereas in non caste based societies increased dispersion has no real effect on dowry payments and increasing average wealth causes the payments to decline

inflation and the financing of government expenditure an introductory analysis with an application to turkey this article presents a simple framework to assess the consistency of appropriately defined fiscal deficits with other macroeconomic targets such as inflation it also considers the relation of fiscal deficits to output growth real exchange rate developments and management of internal and external debt finally it considers the implications of relying on interest bearing government debt to postpone the adjustment necessary to restore consistency with inflation targets it demonstrates how the intertemporal budget constraint of the government creates a tradeoff between current and future adjustment real interest rates and output growth rates are shown to determine the terms at which this tradeoff takes place the usefulness of this framework is demonstrated through an analysis of fiscal policy options in turkey in 1985

sorting and decentralized price competition we investigate the role of search frictions in markets with price competition and how it leads to sorting of heterogeneous agents there are two aspects of value creation the match value when two agents actually trade and the probability of trading governed by the search technology we show that positive assortative matching obtains when complementarities in the former outweigh complementarities in the latter this happens if and only if the match value function is root supermodular that is its nth root is supermodular where n reflects the elasticity of substitution of the search technology this condition is weaker than the condition required for positive assortative matching in markets with random search

sex preferences marital dissolution and the economic status of women author s bedard kelly deschenes olivier abstract the rise in the divorce rate over the past 40 years is one of the fundamental changes in american society a seemingly ever increasing number of women and children spend some fraction of their life in single female headed households leading many to be concerned about the economic circumstances of these women their and children estimating the cause to effect relationship between marital dissolution and female economic status is complicated because the same factors that increase marital instability may also affect the economic status and labor market behavior of women we propose an instrumental variables solution to this problem based on the sex of the firstborn child this strategy exploits the fact that the sex of the firstborn child is random and the fact that marriages are less likely to survive following the birth of girls as opposed to boys our iv estimates cast doubt on the contention that marital instability causes large declines in woman s economic status once the negative selection into divorce is accounted for we find that women who have experienced marital dissolution have considerably higher levels of personal income and annual wages than women who remain married at the same time we find little evidence of differential poverty rates and equivalized household incomes among ever divorced women and never divorced women we further show that the higher wages of ever divorced women mostly reflect increased labor supply intensity hours and weeks of work of woman who experienced marital dissolution

bargaining in dynamic markets abstract we study non stationary markets in which traders are randomly matched to bargain over the price of a heterogeneous good or the terms of a partnership the economy consists of a continuum of players drawn from a finite set of types players exogenously enter the market over time and exit upon trading at every date matching probabilities for each pair of types are determined by the endogenous distribution of trader types in the market the balance of bargaining power at any stage depends on variations in potential gains from trade the inflows of new traders the structure of agreements at future dates and the induced frequency of trading opportunities we establish that an equilibrium always exists moreover all equilibria that lead to the same evolution of the economy are payoff equivalent however we show that multiple self fulfilling expectations about the trajectory of the economy generating distinct equilibrium dynamics and payoffs may coexist

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

exchanging good ideas abstract this paper develops a framework to describe how the existence of technological spillovers leads to a distribution of technology clusters marshallian spillovers in this paper are assumed to be due to interaction of labor the dynamics of cluster size composition and technology accumulation are characterized

matching with interviews abstract this paper explores how interviews affect the matching process when worker productivity is private information wages are determined by a single round of strategic bargaining after the worker is interviewed the implications of this hiring process for the efficiency of matching and the incidence and severity of statistical discrimination are considered the better are firms at identifying productive workers the worse the average quality of the unemployment pool so interviewing tends to slow down matching for every one multiple pareto rankable equilibria are possible such that any social group in a bad equilibrium faces stricter hiring standards longer spells of unemployment and lower welfare

beauty vs earnings gender differences in earnings and priorities over spousal characteristics in a matching model abstract i develop a model of marriage matching where males and females care about two distinct characteristics of their spouse beauty and earnings each individual s beauty is exogenous but earnings depend on human capital investments made by each individual prior to entering the marriage market i show that even if males and females constitute ex ante identical populations with identical underlying preferences and equal access to human capital investment and labor market opportunities there can still exist an equilibrium where on average one gender invests more in human capital than the other and moreover members of one gender are more likely to prioritize beauty over earnings in a spouse while members of the other gender are more likely to prioritize a potential spouse s earnings over beauty

information externalities and intermediaries in frictional search markets in frictional matching markets with heterogeneous buyers and sellers sellers incur discrete showing costs to show goods to buyers who incur discrete inspection costs to assess the suitability of the goods on offer we study how brokers can help reduce these costs by managing the level and mix of goods in their inventory intermediaries emerge and improve social welfare when there is sufficient heterogeneity in the types of goods and preferences learning and inventory management enable search intermediaries to internalize information externalities generated in unintermediated private search resume externalites informationnelles et intermediaires dans des marches frictionnels de recherche dans des marches frictionnels d arrimage ou acheteurs et vendeurs sont heterogenes les vendeurs doivent encourir des couts separes pour montrer leurs produits aux acheteurs qui doivent pour leur part encourir des couts separes d inspection pour s assurer que les biens offerts leur conviennent on etudie comment des courtiers peuvent aider a reduire ces couts en gerant le niveau et la mixite des biens dans leurs inventaires des intermediaires emergent qui ameliorent le bien etre social quand il y a heterogeneite suffisante des types de biens et de preferences l apprentissage et la gestion des inventaires permettent aux intermediaires de recherche d internaliser les externalites informationnelles engendrees dans le processus de recherche privee sans l aide d intermediaires

international business cycles the authors estimate a dynamic two country model in which economic fluctuations are driven by a worldwide supply shock country specific supply shocks and relative fiscal money and preference shocks identification is achieved using only long run restrictions based on a theoretical model the main results are 1 supply shocks particularly country specific ones are very important in generating international business cycles and 2 although the post 1973 flexible exchange rate period has been inherently more volatile there are no differences in transmission properties of economic disturbances across exchange rate regimes for the endogenous variables they focus on copyright 1993 by american economic association

loan collateral corporate investment and business cycle abstract collateral and loan rates are observed to be highly cyclical in their use for bank lending the effects of such cyclicality on corporate investment are analyzed in this paper using a dynamic model we find that more collateral causes firms to select riskier safer projects if the loan rate rises above falls below the expected investment return we show that the incentive effect of loan rates becomes stronger with greater collateral with the two credit terms having larger incentive effects on lower quality firms these results offer a new explanation for why lenient collateral policies are associated with rising loan rates in economic upturns but stricter collateral requirements come with falling loan rates during downturns

multiple equilibria and minimum wages in labor markets with informational frictions and heterogeneous production technologies it is often argued that a mandatory minimum wage is binding only if the wage density displays a spike at it in this article we analyze a model with search frictions and heterogeneous production technologies in which imposition of a minimum wage affects wages even though after imposition the lowest wage in the market exceeds the minimum wage the model has multiple equilibria as a result of the fact that the reservation wage of the unemployed and the lowest production technology in use affect each other imposition of a minimum wage may improve social welfare

sorting through search and matching models in economics toward understanding assortative matching this is a self contained introduction to research on search and matching we first explore the nontransferable and perfectly transferable utility matching paradigms and then a unifying imperfectly transferable utility matching model motivated by some unrealistic predictions of frictionless matching we flesh out the foundational economics of search theory we then revisit the original matching paradigms with search frictions we finally allow informational frictions that often arise such as in college student sorting

frictional assignment i efficiency abstract this paper examines the two sided matching problem where the agents on each side of the market are heterogeneous and the matching process is time consuming this is cast in a labor market setting where workers of different skills match with different machine qualities i characterize the efficient allocation and then show that it can be decentralized by a market mechanism the efficient assignment is not always positively assortative despite the fact that machine qualities and skills are complementary in production to decentralize the efficient allocation the market mechanism requires the firms to post wages and commit each machine quality to a particular skill implications on wage inequality are briefly examined journal of economic literature classification numbers j31 e24 j64

too good to fire non assortative matching to play a dynamic game abstract we model stable non assortative labor market matchings we endogenize how transferable utility is a matched firm and worker play an infinite horizon game with one sided moral hazard becker s 1973 result that complementarity yields positively assortative matching fails because increasing match quality harms dynamic incentives a firm cannot credibly threaten to fire a worker who is productive even with low effort thus firms may prefer lower type workers who will exert more effort we offer a new interpretation of efficiency wages committing to a high wage improves effort incentives indirectly by increasing the firm s willingness to walk away we also show that the set of stable outcomes has a lattice structure

marriage markets and money a coasian theory of household formation this article integrates search based models of marriage and money we think about households as organizations the way coase thinks about firms as alternatives to markets that become more attractive when transactions costs increase in the model individuals consume market and home produced goods and home production is facilitated by marriage market frictions including taxes search and bargaining problems increase the marriage propensity the inflation tax encourages marriage because being single is cash intensive microdata confirm singles use cash more than married people we use macrodata over many countries to investigate how marriage responds to inflation taxation and other variables

minorities and endogenous segregation a theoretical analysis is proposed of segregation as an equilibrium phenomenon in a randommatching model of the marriage market otherwise identical partners possess a pay off irrelevant characteristic colour we derive the set of colour blind equilibria and show that they are generically constrained inefficient equilibrium segregation strategies are strategies that condition actions on the type of match it is shown that distributions of types exist such that segregation equilibrium pay offs pareto dominate colour blind pay offs for other distributions segregation also generates conflict where the majority unambiguously gains while the minority group may lose giving preferential treatment that is minority bias can increase overall welfare

debt relief and economic growth in mexico could external restraint and internal balance in mexico have been reconciled at levels of savings and investment that allowed satisfactory growth in output without the 1989 90 restructuring of debt what are the likely implications of mexico s brady deal on economic growth what are the macroeconomic effects of debt equity swaps this article develops and estimates a model to address these issues the analysis concludes that the 1989 90 agreement in mexico will contribute materially to macroeconomic stability and the restoration of economic growth copyright 1991 by oxford university press

structural estimation of marriage models a structural approach is used to examine who matches with whom a two sided matching model that allows for marital sorting in response to marriage market flexibility and agents preferences is utilized estimation is based on imbedding the numerical solution of a matching model within a maximum likelihood procedure results indicate that wage is more desirable than education in predicting marriageability for white men education is more desirable for black men the marriage market for white men is more flexible both marriage market flexibility and the chance of being classified correctly using agents wage and education decrease with age for white men

sorting and long run inequality many social commentators have raised concerns over the possibility that increased sorting in society may lead to greater inequality to investigate this we construct a dynamic model of intergenerational education acquisition fertility and marital sorting and parameterize the steady state to match several basic empirical endings we end that increased sorting will signiecantly increase income inequality four factors are important to our endings a negative correlation between fertility and education a decreasing marginal effect of parental education on children s years of education wages that are sensitive to the relative supply of skilled workers and borrowing constraints that affect educational attainment for some low income households

specialization and efficiency with labor market matching abstract this paper constructs a labor market matching model with heterogeneous workers due to matching frictions there may be a mismatch of talents within a production team forcing a worker to specialize in a task at which she is not talented we consider a partnership model where production takes place in teams consisting of two workers we characterize the steady state of the matching equilibrium the constrained efficiency of the matching equilibrium depends on the distribution of talents the constrained efficient allocation can always be implemented by a type specific tax we also examine an alternative model with diamond mortensen pissarides type matching between firms and workers

a model of the it products in fashion one of the characteristics of the fashion marketplace is the unpredictability and apparent randomness of fashion hits another one is the information asymmetry among consumers in this paper we consider fashion as a means consumers use to signal belonging to a higher social rank and propose an analytical model of fashion hits in the presence of competition and consumers who can coordinate on which product to use we show that consistent with the observed market phenomenon in equilibrium consumer coordination involves randomization between products chosen i e in randomness of fashion hits analyzing optimal consumer choice we find that whenever low type consumer demand for a product is positive a price increase results in a higher probability of high type consumers choosing this product but lower low type consumer demand we also show that although high type consumers may prefer higher prices that would lead to complete separation of the high and the low type consumers through product use in equilibrium firms always price as to attract positive demand from low type consumers the equilibrium price and profits turn out to be nonmonotonic in the low type consumer valuation of being recognized as belonging to a higher social rank equilibrium profits first increase and then decrease in this valuation

aspirations segregation and occupational choice this paper examines the steady states of an overlapping generations economy with a given distribution of household locations over a one dimensional interval parents decide whether or not to educate their children educational decisions are affected by location there are local complementarities in investment incentives stemming from aspirations formation learning spillovers or local public goods at the same time economy wide wages endogenously adjust to bring factor supplies into line with demand the model therefore combines local social interaction with global market interaction the paper studies steady state configurations of skill acquisition both with and without segregation the model is used to compare macroeconomic and welfare properties of segregated and unsegregated steady states jel d31 o15 d85

new roles for marriage in urban africa kinship networks and the labor market in kenya abstract this paper explores new roles that traditionally rural kinship networks organized around the marriage institution might play in improving labor market outcomes in urban africa using new data from kisumu kenya and controlling for selection into marriage we find that marriage significantly increases employment levels and incomes in our sample of migrants at the same time marriage increases the remittances that migrants send to the extended family consistent with the view that the benefits of the network come with additional social obligations these obligations appear to be borne disproportionately by high ability individuals who consequently defer marriage the negative selection into marriage that we uncover has consequences for the future viability of the urban networks with implications for long term growth and distribution in this economy

the right man for the job this paper describes a search model with a continuum of worker and job types free entry and transferable utility we apply a second order taylor expansion to characterize the equilibrium derive the cost of search and show that it is decreasing in the substitutability of worker types this cost of search is then decomposed into three components unemployment vacancy costs and mismatch our contact technology rules out congestion effects between different worker types and therefore exhibits increasing returns to scale one third of those increasing returns in contacts are shown to be absorbed by firms and workers being more choosy the resulting equilibrium is not efficient unemployment benefits can reduce the loss by serving as a search subsidy numerical simulations of the model show that our taylor expansions are quite accurate 2004 the review of economics studies limited

taxes and marriage a two sided search analysis this article analyzes the effects of differential tax treatment of married and single individuals in the united states on marriage formation and composition divorce and labor supply we develop a marriage market model with search frictions and heterogeneous agents that is sufficiently rich to capture key elements of the problem under consideration we then calibrate the model and use it to evaluate the quantitative effects of several tax reforms aimed at making the tax law neutral with respect to marital status we find that these reforms i systematically increase the labor supply of married females with changes ranging from 0 3 to 10 1 percent ii have substantial effects on the correlation of spouses incomes which changes from 0 2 to values between 0 185 and 0 334 iii can lead to either an increase or decrease in the fraction of people married with changes that range from 0 6 to 2 4 percent

marriage divorce and reciprocity based cooperation this paper considers partnership formation partnership dissolution and reciprocity based cooperation by couples in the form of voluntary transfers to smooth consumption while risk sharing is one benefit of having a partner it is also limited by the endogenous risk of separation the equilibrium formation and dissolution of partnerships are determined simultaneously with cooperative behavior publicly provided earnings insurance is shown to increase the turnover rate in the marriage market as well as to reduce the steady state marriage rate and the implicit financial cooperation between partners

turnover externalities with marketplace trading this article considers equilibrium decentralized trade when there is a marketplace where buyers and sellers meet costlessly since buyers have idiosyncratic match payoffs for each seller s good some buyers rather than trade with the current stock of sellers wait for new sellers to enter the marketplace to obtain a good they like a turnover externality exists where all traders are better off with higher entry rates of new traders furthermore this turnover externality supports multiple pareto rankable equilibria this provides new insights into similar results obtained in the random matching literature

education segregation and marital sorting theory and an application to the uk abstract this paper presents a model of the intergenerational transmission of education and marital sorting parents matter both because of their household income and because their human capital determines the distribution of a child s disutility from making an effort to become skilled we show that an increase in segregation has potentially ambiguous effects on the proportion of individuals that become skilled in the steady state and hence on marital sorting the personal and household income distribution and welfare we calibrate the steady state of our model to uk statistics we find that an increase in the correlation of spouses in their years of education will bring about a small increase in the proportion of skilled individuals when the relative supply of skilled individuals is variable at the family level and a decrease when this supply is fixed ex ante utility of an unborn individual increases in the first case and decreases in the second the welfare effect of increased sorting is negative for unskilled individuals and positive for skilled individuals increased segregation always leads to an increase in welfare inequality between skilled and unskilled individuals

from dark to light skin color and wages among african americans this paper develops and tests a theory referred to as preference for whiteness which predicts that the interracial white black and intraracial wage gap widens as the skin shade of the black worker darkens using data drawn from the multi city study of urban inequality and the national survey of black americans we report evidence largely consistent with the theory moreover we decompose the estimated interracial and intraracial wage gaps and find that favorable treatment of lighter skinned workers is a major source of interracial and intraracial wage differences as predicted by the theory

intermediation in markets for goods and markets for assets abstract we analyze agents decisions to act as producers or intermediaries using equilibrium search theory extending previous analyses in various ways we ask when intermediation emerges and study its efficiency in one version of the framework meant to resemble retail middlemen hold goods which entails storage costs that model always displays uniqueness and simple transition dynamics in another version middlemen hold assets which entails negative costs i e positive returns that model can have multiple equilibria and complicated belief based dynamics these results are consistent with the venerable view that intermediation in financial markets is more prone to instability than in goods markets

more on middlemen equilibrium entry and efficiency in intermediated markets this paper generalizes rubinstein and wolinsky s 1987 model of middlemen intermediation by incorporating production and search costs plus more general matching and bargaining this allows us to study many new issues including entry efficiency and dynamics in the benchmark model equilibrium exists uniquely and involves production and intermediation for some parameters but not others sometimes intermediation is essential the market operates if and only if middlemen are active if bargaining powers are set correctly equilibrium is efficient if not there can be too much or too little economic activity this is novel compared to the original rubinstein wolinsky model where equilibrium is always efficient

social norms savings behavior and growth we argue that many goods and decisions are not allocated or made through markets we interpret an agent s status as a ranking device that determines how well he or she fares in the nonmarket sector the existence of a nonmarket sector can endogenously generate a concern for relative position in for example the income distribution so that higher income implies higher status moreover it can naturally yield multiple equilibria it is thus possible to explain differences in growth rates across countries without recourse to differences in underlying preferences technologies or endowments different social organizations lead to different reduced form preferences which lead to different growth rates

birth control and female empowerment an equilibrium analysis we analyze from a theoretical perspective the impact of innovations in birth control technology on intrahousehold allocation of resources we consider a model of frictionless matching on the marriage market in which men as well as women differ in their preferences for children moreover men unlike women must marry to enjoy fatherhood we show that more efficient birth control technologies generally increase the power hence the welfare of all women including those who do not use them this empowerment effect requires that the new technology be available to single women an innovation reserved to married women may result in a disempowerment effect

the assignment of workers to jobs in an economy with coordination frictions this paper studies the assignment of heterogeneous workers to heterogeneous jobs owing to the anonymity of a large labor market workers use mixed strategies when applying for jobs this randomness generates coordination frictions two workers may apply for a particular job whereas an identical job gets no applications the model generates assortative matching with a positive but imperfect correlation between matched workers and firms types it predicts that a worker s wage is increasing in her job s productivity and a firm s profit is increasing in its employees productivity the model also yields a version of the welfare theorems

long term partnership formation marriage and employment of course marriage and employment are different nevertheless a worker looking for a job a rm looking for worker or a single person looking for a marriage partner face similar problems as all are seeking a long term partner indeed forming long term partnerships is a common occurrence in life there are many other examples business people search for other business people to form a pro table relationship bridge players seek to nd a suitable partners students search for a good university we would all like to nd a good friend etc the problem becomes signi cant if there are substantial differences in the return obtained from forming a partnership with different partners for example employers differ in the wages they offer or in the work environment they provide in such a situation a worker may reject some job offers similarly as many have learned to their cost some make better marriage partners than others the problem is two sided while a worker is evaluating a potential employer the employer is also evaluating the worker it is this two sided aspect of the problem that generates a signi cant interest a worker s willingness to accept employment at a rm depends not only on the characteristics of the rm but also the other possible options open to the worker the better an individual s opportunities elsewhere the more selective he or she will be in evaluating a potential partnership an academic who believes harvard may make an offer in the near future will be more selective in evaluating offers from lesser universities in this way expectations play a role if a single man believes that few if any women will nd him an acceptable marriage partner then he may accept the rst opportunity that presents itself partnership formation typically does not comply with a classic market situation where all participants know everything and all trades take place at zero cost finding a job nding a husband or wife or nding a business partner is a time consuming activity where opportunities typically arrive over time at uncertain intervals of time of course we can act in ways that in uence the arrival rate of potential partner workers go to employment agencies or read help wanted advertisements in newspapers singles of a certain age go to discos or join tennis clubs the literature on search and matching sm see mortensen 1982 and pissarides 1990 for early examples 1 provides an excellent framework for the economic journal 109 june f307 f334 royal economic society 1999 published by blackwell publishers 108 cowley road oxford ox4 1jf uk and 350 main street malden ma 02148 usa

marriage and the city search frictions and sorting of singles this paper develops and tests a model where cities play an important role as marriage markets the idea is simple cities are dense areas where singles can meet more potential partners than in rural areas to enjoy those benefits they are willing to pay a premium in terms of higher housing prices once married the benefits from meeting more potential partners vanish and married couples move out of the city attractive singles benefit most from a dense market and are therefore more likely to move to the city those predictions are tested and confirmed with a unique danish data set

competitive search equilibrium with multidimensional heterogeneity and two sided ex ante investments abstract we analyze a competitive price taking search model where workers and firms make costly investments e g in education and physical capital respectively before they enter the labor market the environment features transferable utility and symmetric information a key novelty with respect to existing work is that we allow for multidimensional heterogeneity on both sides of the market the probabilities of finding and filling different jobs and the corresponding wages are determined endogenously in equilibrium we show that constrained efficient allocations can be determined as optimal solutions to a linear programming problem whereas the prices supporting these allocations and the associated expected payoffs for workers and firms correspond to the solutions of the dual of that linear program we use this characterization to show that an equilibrium exists and is constrained efficient under very general conditions the fact that linear programming techniques are used for the structural estimation of frictionless matching models suggests that our framework is potentially useful for empirical studies of labor markets and other markets where search frictions are prevalent

the q s s pricing rule we introduce menu costs in the search theoretic model of imperfect competition of burdett and judd when menu costs are not too large the equilibrium is such that sellers follow a q s s pricing rule according to the rule a seller lets inflation erode the real value of its nominal price until it reaches some point s then the seller pays the menu cost and resets the real value of its nominal price to a point randomly drawn from a distribution with support s q where s s q a q s s equilibrium differs with respect to a standard s s equilibrium 1 in a q s s equilibrium sellers sometimes keep their nominal price constant to avoid paying the menu cost other times because they are indifferent to changes in the real value of their price an exploratory calibration reveals that menu costs account less than half of the observed duration of nominal prices 2 in a q s s equilibrium higher inflation leads to higher real prices as sellers pass onto buyers the cost of more frequent price adjustments and to lower welfare

divorce remarriage and child support there is some evidence that children of divorced parents do not perform as well as comparable children in intact families but that this gap declines with the aggregate divorce rate we develop a model in which the higher expectations for remarriage associated with higher divorce rates can trigger an equilibrium in which divorced fathers make more generous transfers that benefit their children and the mother in the aftermath of divorce as a result the welfare loss of children from the separation of their parents can be lower when divorce and remarriage rates rise

to each according to markets tournaments and the matching problem with borrowing constraints we compare the performance of markets and tournaments as allocative mechanisms in an economy with borrowing constraints the economy consists of a continuum of individuals who differ in their initial wealth and ability level these must be assigned to a continuum of investment opportunities or inputs of different productivity with perfect capital markets matching is efficient under both mechanisms markets however generate higher aggregate consumption because of the waste associated with the production of signals under tournaments when borrowing constraints are present tournaments dominate markets in terms of matching efficiency and for sufficiently powerful signalling technologies also in terms of aggregate consumption