Stochastic Sorting by Jan Eeckhout

Join us for this weeks Macroeconomics Research Seminar, Autumn Term 2023.

Join Jan Eeckhout, from Universitat Pompeu Fabra, Barcelona, who will present this weeks Macroeconomics seminar on Stochastic Sorting.

Abstract

We analyze matching markets with stochastic characteristics: agents’ payoff-relevant characteristics are realized after matching takes place, and matches are formed based on ex-ante attributes that affect the distributions of ex-post ones. This generates stochastic sorting patterns and naturally gives rise to ex-post mismatch and correlation in realizations due to selection. We derive conditions for positive and negative sorting in the standard setting with transferable utility, as well as in the more complex case with non-transferable utility, such as risk sharing and moral hazard problems. In addition to complementarity in the match output function, the conditions for assortative matching now also depend on the properties of the stochastic order imposed on the distributions of the agents’ ex-post characteristics. We provide two applications of the model: one analyses mismatch in the labor market for executives, and the other decomposes the sources of increased inequality of married household into marital and stochastic sorting.

This seminar will be held on campus in the Economics Common Room at 10.30pm on Monday 4th December 2023. This event is open to all levels of study and is also open to the public. To register your place, please contact the seminar organisers.

This event is part of the Macroeconomics Research Seminar Series.