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Mis-match, Re-match, and Investment

Author

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  • Thomas Gall

    (Boston University and University of Bonn)

  • Patrick Legros

    (ECARES, Universit´e Libre de Bruxelles and CEPR)

  • Andrew F. Newman

    (Boston University and CEPR)

Abstract

Mobility depends essentially on investment, which often occurs in environments in which individuals match (school) or will match after investing (the labor market). Where partners can transfer surplus to each other only imperfectly (NTU), the pattern of matching will typically be inefficient, involving too much segregation, and providing a possible rationale for ”associational redistribution” such as affirmative action: a social planner who could enforce a matching outcome that differs from the market outcome may raise aggregate social surplus. We show that this static inefficiency due to NTU can be exacerbated in a dynamic environment in which individuals’ productive types are determined by investments made before they match. In contrast to TU models there will typically be investment distortions, with high types over-investing and low types under-investing. We study several forms of associational redistribution, assessing the differential effects of achievement-based and background-based polices; early-stage and later-stage policies; and interactions between them.

Suggested Citation

  • Thomas Gall & Patrick Legros & Andrew F. Newman, 2009. "Mis-match, Re-match, and Investment," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-189, Boston University - Department of Economics.
  • Handle: RePEc:bos:iedwpr:dp-189
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    File URL: http://www.bu.edu/econ/ied/dp/papers/dp%20189.pdf
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    References listed on IDEAS

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    1. repec:stn:sotoec:360186 is not listed on IDEAS
    2. repec:spr:jogath:v:46:y:2017:i:1:d:10.1007_s00182-015-0522-6 is not listed on IDEAS
    3. V. Bhaskar & Ed Hopkins, 2016. "Marriage as a Rat Race: Noisy Premarital Investments with Assortative Matching," Journal of Political Economy, University of Chicago Press, vol. 124(4), pages 992-1045.
    4. Andrea, Canidio, 2010. "Absorptive capacity, the allocation of scientists, and firms' research productivity," MPRA Paper 30257, University Library of Munich, Germany.
    5. Raquel Fernandez, 2010. "Women's Rights and Development," Working Papers 2011-029, Human Capital and Economic Opportunity Working Group.
    6. Chris Bidner & Guillaume Roger & Jessica Moses, 2016. "Investing in Skill and Searching for Coworkers: Endogenous Participation in a Matching Market," American Economic Journal: Microeconomics, American Economic Association, vol. 8(1), pages 166-202, February.
    7. Fernández, Raquel, 2009. "Women's Rights and Development," CEPR Discussion Papers 7464, C.E.P.R. Discussion Papers.
    8. Andrea Canidio, 2012. "The Allocation of Scientific Talent," CEU Working Papers 2012_7, Department of Economics, Central European University, revised 15 May 2012.
    9. Gall, Thomas & Hu, Xiaocheng & Vlassopoulos, Michael, 2016. "Dynamic Incentive Effects of Team Formation: Experimental Evidence," IZA Discussion Papers 10393, Institute for the Study of Labor (IZA).
    10. Raquel Fernández, 2009. "Women's Rights and Development," NBER Working Papers 15355, National Bureau of Economic Research, Inc.
    11. Andrea, Canidio, 2009. "The production of science," MPRA Paper 25218, University Library of Munich, Germany.

    More about this item

    Keywords

    Matching; nontransferable utility; affirmative action; segregation; education;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • J78 - Labor and Demographic Economics - - Labor Discrimination - - - Public Policy (including comparable worth)

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