The Comparative Statics of Sorting

Axel Anderson and Lones Smith ()
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Lones Smith: Department of Economics, University of Wisconsin, https://www.lonessmith.com/

Working Papers from Georgetown University, Department of Economics

Abstract: We create a general and tractable theory of increasing sorting in pairwise matching models with transferable utility — one that subsumes Becker (1973) as the extreme cases with most and least sorting. We first prove that the positive quadrant dependence order smartly measures increasing sorting, e.g. it rises in the correlation of matched partners. Our theory centers on synergy — the cross partial difference or derivative of match production. Notably, if synergy everywhere increases, sorting need not rise, but cannot fall. To rescue increasing sorting, we posit often met cross-sectional restrictions on match synergy. Our theory illuminates top economics sorting papers, affording quick proofs of their results and new insights. Synergy reflects basic economic forces, such as diminishing returns, moral hazard, insurance, and learning dynamics. Our proof develops and exploits new monotone comparative statics methods. The main proof proceeds by induction with finitely many types, and secures the continum type results by taking limits. Classification- C6, D2, D5, J1

Keywords: Sorting; comparative statics; matching; complementarity; single crossing aggregation; monotone methods (search for similar items in EconPapers)
Pages: 41
Date: 2021-03-16
New Economics Papers: this item is included in nep-mic and nep-upt
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Citations: View citations in EconPapers (1)

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Journal Article: The Comparative Statics of Sorting (2024)
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