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Unraveling Over Time

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  • Sandro Ambuehl
  • Vivienne Groves

Abstract

Unraveling, the excessively early matching of future workers to employers, is a pervasive phenomenon in entry-level labor markets that leads to hiring decisions based on severely incomplete information. We provide a model of unraveling in one-to-one matching markets for prestigious positions. Its distinguishing feature is that the market operates over an extended time period during which information about potential matches arrives gradually. We find that unraveling causes potentially thick markets to spread thinly over a long time period. In equilibrium, an employers desirability is correlated neither with the time at which they hire, nor with the expected productivity of their matched worker. Unraveling thus significantly redistributes welfare among employers compared to a pairwise stable match. We study policies that manipulate the availability of information about students and show that they are effective only if they provide a sudden surge in information. Our main application is the market for U.S. federal appellate court clerks, a significant input into the efficiency of the justice system. Consistent with the model, hiring times in our dataset are spread over a period of six months and are uncorrelated with the desirability of a judge as an employer.

Suggested Citation

  • Sandro Ambuehl & Vivienne Groves, 2017. "Unraveling Over Time," CESifo Working Paper Series 6739, CESifo.
  • Handle: RePEc:ces:ceswps:_6739
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    References listed on IDEAS

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    1. Halaburda, Hanna, 2010. "Unravelling in two-sided matching markets and similarity of preferences," Games and Economic Behavior, Elsevier, vol. 69(2), pages 365-393, July.
    2. Alvin E Roth & Richard A Posner & Christine Jolls & Christopher Avery, 2007. "The New Market for Federal Judicial Law Clerks," Levine's Bibliography 843644000000000288, UCLA Department of Economics.
    3. Roth, Alvin E & Xing, Xiaolin, 1994. "Jumping the Gun: Imperfections and Institutions Related to the Timing of Market Transactions," American Economic Review, American Economic Association, vol. 84(4), pages 992-1044, September.
    4. Haruvy, Ernan & Roth, Alvin E. & Unver, M. Utku, 2006. "The dynamics of law clerk matching: An experimental and computational investigation of proposals for reform of the market," Journal of Economic Dynamics and Control, Elsevier, vol. 30(3), pages 457-486, March.
    5. Muriel Niederle & Alvin E. Roth & M. Utku Ünver, 2013. "Unraveling Results from Comparable Demand and Supply: An Experimental Investigation," Games, MDPI, Open Access Journal, vol. 4(2), pages 1-40, June.
    6. repec:oup:amlawe:v:19:y:2017:i:1:p:96-128 is not listed on IDEAS
    7. Fainmesser, Itay P., 2013. "Social networks and unraveling in labor markets," Journal of Economic Theory, Elsevier, vol. 148(1), pages 64-103.
    8. Roth, Alvin E, 1984. "The Evolution of the Labor Market for Medical Interns and Residents: A Case Study in Game Theory," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 991-1016, December.
    9. Posner, Richard A. & Avery, Christopher & Jolls, Christine & Roth, Alvin, 2001. "The Market for Federal Judicial Law Clerks," Scholarly Articles 2623748, Harvard University Department of Economics.
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    11. Adam Bonica & Adam S. Chilton & Jacob Goldin & Kyle Rozema & Maya Sen, 2017. "The Political Ideologies of Law Clerks," American Law and Economics Review, Oxford University Press, vol. 19(1), pages 96-128.
    12. Echenique, Federico & Pereyra, Juan Sebastián, 2016. "Strategic complementarities and unraveling in matching markets," Theoretical Economics, Econometric Society, vol. 11(1), January.
    13. Wing Suen, 2000. "A Competitive Theory of Equilibrium and Disequilibrium Unravelling in Two-Sided Matching," RAND Journal of Economics, The RAND Corporation, vol. 31(1), pages 101-120, Spring.
    14. Hao Li & Wing Suen, 2000. "Risk Sharing, Sorting, and Early Contracting," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 1058-1087, October.
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