The comparative statics of differential rents in two-sided matching markets |
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Authors: | Wing Suen |
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Institution: | (1) School of Economics and Finance, University of Hong Kong, Pokfulam, Hong Kong |
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Abstract: | This paper studies how shifts in the distribution of quality on one side of the market affect earnings on the other side in
a model of one-to-one matching. A more dispersed distribution of quality hurts the low ability agents on the other side because
they are matched to inferior partners. Earnings being a differential rent in these markets, this pulls down the earnings of
high quality agents as well. It is shown that a more dispersed ability distribution reduces total earnings on the opposite
side of the market. Under some conditions, all agents on that side are hurt.
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Keywords: | assignment model skill premium stochastic dominance |
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