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Wage Formation in a Centralized Matching Market

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  • Kamecke, Ulrich

Abstract

It is natural to ask why the market for interns in the United States of America has to be cleared with a centralized matching procedure (the NRMP) and how this rationing procedure affects equilibrium wages. This paper presents a model in which a market failure is caused by insufficiently differentiated wages. The NRMP solves the problem but it enables the hospitals to extract more surplus from their interns than they could in an ideal competitive equilibrium. It is demonstrated that this distortion causes welfare losses if the hospitals can substitute between physicians and interns. Copyright 1998 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Kamecke, Ulrich, 1998. "Wage Formation in a Centralized Matching Market," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 33-53, February.
    • Handle: RePEc:ier:iecrev:v:39:y:1998:i:1:p:33-53
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    Cited by:

    1. Alvin Roth, 2008. "Deferred acceptance algorithms: history, theory, practice, and open questions," International Journal of Game Theory, Springer;Game Theory Society, vol. 36(3), pages 537-569, March.
    2. Jeremy Bulow & Jonathan Levin, 2006. "Matching and Price Competition," American Economic Review, American Economic Association, vol. 96(3), pages 652-668, June.
    3. Alvin E. Roth, 2009. "What Have We Learned from Market Design?," Innovation Policy and the Economy, University of Chicago Press, vol. 9(1), pages 79-112.
    4. Muriel Niederle & Alvin E. Roth, 2005. "The Gastroenterology Fellowship Market: Should There Be a Match?," American Economic Review, American Economic Association, vol. 95(2), pages 372-375, May.
    5. Muriel Niederle & Alvin E. Roth, 2001. "Unraveling Reduces the Scope of an Entry Level Labor Market: Gastroenterology With and Without a Centralized Match," NBER Working Papers 8616, National Bureau of Economic Research, Inc.
    6. Alvin E. Roth, 2012. "Marketplace Institutions Related to the Timing of Transactions: Reply to Priest," Journal of Labor Economics, University of Chicago Press, vol. 30(2), pages 479-494.
    7. Ulrich Kamecke, 2014. "Inefficient School Choice in a Long-Run Urban Equilibrium," CESifo Working Paper Series 4969, CESifo.
    8. Alvin E. Roth, 2010. "Marketplace Institutions Related to the Timing of Transactions," NBER Working Papers 16556, National Bureau of Economic Research, Inc.

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