TY - JOUR
T1 - Frictional Assignment. I. Efficiency
AU - Shi, Shouyong
N1 - Funding Information:
1This is the first part of a previously circulated paper entitled ‘‘Frictional assignment’’ [22]. I thank Ken Burdett, George Neumann, and a referee for comments. I have also benefited from comments by workshop and conference participants at Toronto, Tilburg, Laval, Illinois at Urbana-Champaign, Canadian Economic Theory meeting (Toronto, 1998), Canadian Macro Study Group meeting (London, 1999), and American Economic Association meeting (Boston, 2000). Financial support from the Social Sciences and Humanities Research Council of Canada is gratefully acknowledged. All remaining errors are mine alone.
PY - 2001/6
Y1 - 2001/6
N2 - This paper examines the two-sided matching problem where the agents on each side of the market are heterogeneous and the matching process is time consuming. This is cast in a labor market setting where workers of different skills match with different machine qualities. I characterize the efficient allocation and then show that it can be decentralized by a market mechanism. The efficient assignment is not always positively assortative, despite the fact that machine qualities and skills are complementary in production. To decentralize the efficient allocation, the market mechanism requires the firms to post wages and commit each machine quality to a particular skill. Implications on wage inequality are briefly examined. Journal of Economic Literature Classification Numbers: J31, E24, J64.
AB - This paper examines the two-sided matching problem where the agents on each side of the market are heterogeneous and the matching process is time consuming. This is cast in a labor market setting where workers of different skills match with different machine qualities. I characterize the efficient allocation and then show that it can be decentralized by a market mechanism. The efficient assignment is not always positively assortative, despite the fact that machine qualities and skills are complementary in production. To decentralize the efficient allocation, the market mechanism requires the firms to post wages and commit each machine quality to a particular skill. Implications on wage inequality are briefly examined. Journal of Economic Literature Classification Numbers: J31, E24, J64.
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U2 - 10.1006/jeth.2000.2713
DO - 10.1006/jeth.2000.2713
M3 - Article
AN - SCOPUS:0005615355
SN - 0022-0531
VL - 98
SP - 232
EP - 260
JO - Journal of Economic Theory
JF - Journal of Economic Theory
IS - 2
ER -