Evaluating the Efficiency of Regulation in Matching Markets with Distributional Disparities

Kei Ikegami, Atsushi Iwasaki, Akira Matsushita and Kyohei Okumura

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Abstract: Cap-based regulations are widely used to address distributional disparities in matching markets, but their efficiency relative to alternative instruments such as subsidies remains poorly understood. This paper develops a framework for evaluating policy interventions by incorporating regional constraints into a transferable utility matching model. We show that a policymaker with aggregate-level match data can implement a taxation policy that maximizes social welfare and outperforms any cap-based policy. Using newly collected data from the Japan Residency Matching Program, we estimate participant preferences and simulate counterfactual match outcomes under both cap-based and subsidy-based policies. The results reveal that the status quo cap-based regulation generates substantial efficiency losses, whereas small, targeted subsidies can achieve similar distributional goals with significantly higher social welfare.

Date: 2022-05, Revised 2025-07
New Economics Papers: this item is included in nep-dcm, nep-des and nep-reg
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