Assortative Matching and Reputation
AbstractConsider Becker's classic 1963 matching model, with unobserved fixed types and stochastic publicly observed output. If types are complementary, then matching is assortative in the known Bayesian posteriors (the 'reputations'). We discover a robust failure of Becker's result in the simplest dynamic two type version of this world. Assortative matching is generally neither efficient nor an equilibrium for high discount factors. In a labor theoretic rationale, we show that assortative matching fails around the highest (lowest) reputation agents for 'low-skill (high-skill) concealing' technologies. We then find that as the number of production outcomes grows, almost all technologies are of either form. Our theory implies the dynamic result that high-skill matches eventually break up. It also reveals that the induced information rents create discontinuities in the wage profile. This in turn produces life-cycle effects: young workers are paid less than their static marginal product, and old workers more.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1553.
Length: 40 pages
Date of creation: Jan 2006
Date of revision:
Publication status: Published in Review of Economic Studies (January 2010), 77(1): 3-29
Contact details of provider:
Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.econ.yale.edu/
More information through EDIRC
Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
Find related papers by JEL classification:
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Shimer, R. & Smith, L., 1997.
"Assortative Matching and Search,"
97-2a, Massachusetts Institute of Technology (MIT), Department of Economics.
- Mortensen, Dale T, 1982. "Property Rights and Efficiency in Mating, Racing, and Related Games," American Economic Review, American Economic Association, vol. 72(5), pages 968-79, December.
- Lones Smith, 2006. "The Marriage Model with Search Frictions," Journal of Political Economy, University of Chicago Press, vol. 114(6), pages 1124-1146, December.
- Burdett, Ken & Coles, Melvyn G, 1997. "Marriage and Class," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 141-68, February.
- Muriel Niederle & Alvin E. Roth, 2004.
"Market Culture: How Norms Governing Exploding Offers Affect Market Performance,"
NBER Working Papers
10256, National Bureau of Economic Research, Inc.
- Muriel Niederle & Alvin E. Roth, 2004. "Market Culture: How Norms Governing Exploding Offers Affect Market Performance," Levine's Bibliography 122247000000000207, UCLA Department of Economics.
- Muriel Niederle & Alvin E. Roth, 2004. "Market Culture: How Norms Governing Exploding Offers Affect Market Performance," Levine's Bibliography 122247000000000018, UCLA Department of Economics.
- Gretsky, Neil E & Ostroy, Joseph M & Zame, William R, 1992.
"The Nonatomic Assignment Model,"
Springer, vol. 2(1), pages 103-27, January.
- Milton Harris & Bengt Holmstrom, 1981.
"A Theory of Wage Dynamics,"
488, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Jovanovic, Boyan, 1979.
"Job Matching and the Theory of Turnover,"
Journal of Political Economy,
University of Chicago Press, vol. 87(5), pages 972-90, October.
- Kremer, Michael, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 551-75, August.
- Becker, Gary S, 1973. "A Theory of Marriage: Part I," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 813-46, July-Aug..
- Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-20, September.
- Hutchens, Robert M, 1987. "A Test of Lazear's Theory of Delayed Payment Contracts," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages S153-70, October.
- Hector Chade & Greg Lewis & Lones Smith, 2006. "The College Admissions Problem Under Uncertainty," 2006 Meeting Papers 125, Society for Economic Dynamics.
- Costa, Luis Almeida e & Vasconcelos, Luis, 2008.
"Share the Fame or Share the Blame? The Reputational Implications of Partnerships,"
FEUNL Working Paper Series
wp539, Universidade Nova de Lisboa, Faculdade de Economia.
- Luís Almeida Costa & Luís Vasconcelos, 2010. "Share the Fame or Share the Blame? The Reputational Implications of Partnerships," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(2), pages 259-301, 06.
- Hoppe, Heidrun C. & Moldovanu, Benny & Sela, Aner, 2005.
"The Theory of Assortative Matching Based on Costly Signals,"
Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems
85, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Heidrun C. Hoppe & Benny Moldovanu & Aner Sela, 2009. "The Theory of Assortative Matching Based on Costly Signals," Review of Economic Studies, Oxford University Press, vol. 76(1), pages 253-281.
- Hoppe, Heidrun C. & Moldovanu, Benny & Sela, Aner, 2006. "The Theory of Assortative Matching Based on Costly Signals," CEPR Discussion Papers 5543, C.E.P.R. Discussion Papers.
- Ximena Peña, 2006.
"Assortative Matching and the Education Gap,"
gueconwpa~06-06-12, Georgetown University, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Glena Ames).
If references are entirely missing, you can add them using this form.