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Two-Sided Heterogeneity, Endogenous Sharing, and International Matching Markets

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  • Jaerim Choi

    (University of Hawaii at Manoa)

Abstract

This paper develops a multi-country, multi-sector, and multi-factor model of two-sided matching between heterogeneous workers and entrepreneurs in which agents in different countries can form cross-country teams. Sorting, matching, and sharing problems are all considered in a unified framework. Equilibrium is characterized by endogenous sharing rules, which break away from competitive marginal productivity theories of factor returns. I illustrate that a reduction in the cost of sector-specific matching can increase welfare for all agents without conflicts of interest, and that a bilateral economic integration agreement can affect the welfare of agents in an unrelated third country. Furthermore, I demonstrate that rising income inequality can be accompanied by strengthening negative assortative matching.

Suggested Citation

  • Jaerim Choi, 2020. "Two-Sided Heterogeneity, Endogenous Sharing, and International Matching Markets," Working Papers 202006, University of Hawaii at Manoa, Department of Economics.
    • Handle: RePEc:hai:wpaper:202006
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    File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_20-06.pdf
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    References listed on IDEAS

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    Cited by:

    1. Choi, Jaerim, 2023. "Offshoring, matching, and income inequality," Journal of Mathematical Economics, Elsevier, vol. 106(C).

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    More about this item

    Keywords

    Two-Sided Matching; Sorting; Matching; Offshoring; Economic Integration Agreement;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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