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An assignment model with match specific productivity

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  • Alberto Naudon

Abstract

In this article I develop a dynamic assignment model where matches are subjected to persistent idiosyncratic shocks. The model nests two independent models commonly used in the matching literature that have highlighted different aspects of the data. On one hand, there is ex ante heterogeneity as in traditional assignment models, so the equilibrium distribution of the match surplus between partners depends on the distributions of both types of agent characteristics in the economy (Roy (1951), Tinbergen (1951) and Koopmans and Beckmann (1957)). On the other hand, the model incorporates the fact that match outcomes are subjected to match–specific shocks, which may eventually lead to match termination (Jovanovic (1979)). I use the model to study the CEO - firm matching problem, an issue that has taken a lot of attention in recent work. (See for instance, Gabaix and Landier (2008) and Tervio (2008))

Suggested Citation

  • Alberto Naudon, 2010. "An assignment model with match specific productivity," Working Papers Central Bank of Chile 560, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:560
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    File URL: https://www.bcentral.cl/documents/33528/133326/DTBC_560.pdf
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    References listed on IDEAS

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    1. Xavier Gabaix & Augustin Landier, 2008. "Why has CEO Pay Increased So Much?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(1), pages 49-100.
    2. Marko Tervio, 2008. "The Difference That CEOs Make: An Assignment Model Approach," American Economic Review, American Economic Association, vol. 98(3), pages 642-668, June.
    3. Dirk Jenter & Fadi Kanaan, 2015. "CEO Turnover and Relative Performance Evaluation," Journal of Finance, American Finance Association, vol. 70(5), pages 2155-2184, October.
    4. O. Ashenfelter & D. Card (ed.), 1999. "Handbook of Labor Economics," Handbook of Labor Economics, Elsevier, edition 1, volume 3, number 3.
    5. Diego Comin & Sunil Mulani, 2006. "Diverging Trends in Aggregate and Firm Volatility," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 374-383, May.
    6. Steven N. Kaplan & Bernadette Minton, 2006. "How has CEO Turnover Changed? Increasingly Performance Sensitive Boards and Increasingly Uneasy CEOs," NBER Working Papers 12465, National Bureau of Economic Research, Inc.
    7. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-990, October.
    8. A. D. Roy, 1951. "Some Thoughts On The Distribution Of Earnings," Oxford Economic Papers, Oxford University Press, vol. 3(2), pages 135-146.
    9. repec:eee:labchp:v:3:y:1999:i:pb:p:2485-2563 is not listed on IDEAS
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