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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 involves 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. 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 production function changes. In a dynamic extension with CES production, I show that sorting, mobility, and wage inequality positively covary with changes in production across matching markets (or over time). Classification- D31, D51, D71, J24, J31, J6

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  • Axel Anderson, 2021. "Positive Skill Clustering in Role-Assignment Matching Models," Working Papers gueconwpa~21-21-20, Georgetown University, Department of Economics.
    • Handle: RePEc:geo:guwopa:gueconwpa~21-21-20
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    1. Christina Håkanson & Erik Lindqvist & Jonas Vlachos, 2021. "Firms and Skills: The Evolution of Worker Sorting," Journal of Human Resources, University of Wisconsin Press, vol. 56(2), pages 512-538.
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    7. Gavilan, Angel, 2012. "Wage inequality, segregation by skill and the price of capital in an assignment model," European Economic Review, Elsevier, vol. 56(1), pages 116-137.
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    Keywords

    Matching; Sorting; Inequality; Mobility;
    All these keywords.

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