Hierarchical Assignments: Stability and Fairness
We study a simple assigning workers to employers, where each pair of a worker and an employer has a potential joint productivity, and the complete information about the market is contained in the matrix of potential productivities. Under certain conditions that we specify, the market is hierarchical, in the sense that both workers and employers can be ordered according to ability, and the Pareto optimal assignment in terms of maximal total productivity is achieved by matching the top worker with the top employer and so on. In other words, we describe a market situation in which the above simple matching procedure is optimal. Some further properties of hierarchies are presented. We can state explicit values for the earnings in the worker optimal and employer optimal solutions. We further show that our hierarchy concept is descrete analogue to the Ricardian differential rent model of Sattinger (1979), and that the latter one can easily be derived from our model. We discuss the compatibility problems between fairness and stability of earnings and assignments. In particular, two notions of fairness that seem sensible in general fail to be stable in hierarchical markets. First, pairwise sharing the Pareto optimal product using a fixed sharing rule generates stable assignments only under a very restrictive assumption. Second, distributing the same amount to all workers preserves stability only in the extreme situation of an equal distribution of ability among workers. A uniform distribution of ability will always generate a smaller overall production than an uneaven distribution in Pareto optimum. we argue for another notion of fairness that turns out to be stable: an average between the worker optimal and employer otimal solutions. The model can be used to illustrate imperfect competition, economic growth and corruption.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||01 Mar 1996|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 46-(0)8-453 59 00
Fax: 46-(0)8-453 59 80
Web page: http://www.konj.se/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- H. R. Varian, 1973.
"Equity, Envy and Efficiency,"
115, Massachusetts Institute of Technology (MIT), Department of Economics.
- Sattinger, Michael, 1979. "Differential Rents and the Distribution of Earnings," Oxford Economic Papers, Oxford University Press, vol. 31(1), pages 60-71, March.
- Lindbeck, Assar & Snower, Dennis J., 1997.
"Reorganization of Firms and Labor Market Inequality,"
605, Stockholm University, Institute for International Economic Studies.
- Lindbeck, Assar & Snower, Dennis J, 1996. "Reorganization of Firms and Labor-Market Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 315-21, May.
- Lindbeck, A. & Snower, D.J., 1996. "Reorganization of Firms and Labor Market Inequality," Papers 605, Stockholm - International Economic Studies.
- Lindbeck, Assar & Dennis J. Snower , Dennis J., 1995. "Reorganization of Firms and Labor Market Inequality," Working Paper Series 448, Research Institute of Industrial Economics.
- Lindbeck, Assar & Snower, Dennis J., 1996. "Reorganization of Firms and Labour Market Inequality," CEPR Discussion Papers 1375, C.E.P.R. Discussion Papers.
- BLOCH, Francis & RYDER, Harl, 1994.
"Two-Sided Search, Marriages and Matchmakers,"
CORE Discussion Papers
1994028, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Sattinger, Michael, 1993. "Assignment Models of the Distribution of Earnings," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 831-80, June.
- Tjalling C. Koopmans & Martin J. Beckmann, 1955. "Assignment Problems and the Location of Economic Activities," Cowles Foundation Discussion Papers 4, Cowles Foundation for Research in Economics, Yale University.
- Burdett, Ken & Coles, Melvyn G, 1997. "Marriage and Class," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 141-68, February.
- Feldman, Allan M & Kirman, Alan, 1974. "Fairness and Envy," American Economic Review, American Economic Association, vol. 64(6), pages 995-1005, December.
- Kremer, Michael, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 551-75, August.
When requesting a correction, please mention this item's handle: RePEc:hhs:nierwp:0050. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Henrik Hellström)
If references are entirely missing, you can add them using this form.