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Positive Skill Clustering in Role Assignment Matching Models

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Abstract

Kremer and Maskin (1996) explore optimal pairwise matching when production has defined roles. Despite underlying Cobb-Douglas production functions, the induced maximum production function is no longer supermodular, and positive sorting does not arise. This paper introduces and solves a general class of role assignment matching models with a continuum of types and general underlying supermodular production functions. Under robust conditions on skill distributions, the unique equilibrium entails a novel blend of positive sorting in the large, and locally negative sorting that I call positive clustering. I show how the equilibrium matching changes as the skill distribution or the production function changes. In a salient illustrative example with a geometric distribution over types, I show how sorting and wage inequality respond to changes in production and the skill distribution. Classification- J21,C78,D33

Suggested Citation

  • Axel Anderson, 2021. "Positive Skill Clustering in Role Assignment Matching Models," Working Papers gueconwpa~21-21-05, Georgetown University, Department of Economics.
    • Handle: RePEc:geo:guwopa:gueconwpa~21-21-05
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