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The comparative statics of differential rents in two-sided matching markets

Abstract

This paper studies how shifts in the distribution of quality on one side of the market affect earnings on the other side in a model of one-to-one matching. A more dispersed distribution of quality hurts the low ability agents on the other side because they are matched to inferior partners. Earnings being a differential rent in these markets, this pulls down the earnings of high quality agents as well. It is shown that a more dispersed ability distribution reduces total earnings on the opposite side of the market. Under some conditions, all agents on that side are hurt.

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Correspondence to Wing Suen.

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Suen, W. The comparative statics of differential rents in two-sided matching markets. J Econ Inequal 5, 149–158 (2007). https://doi.org/10.1007/s10888-006-9034-8

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Key words

  • assignment model
  • skill premium
  • stochastic dominance

JEL Classification

  • D31
  • J31
  • J41