Two-Sided Heterogeneity, Endogenous Sharing, and International Matching Markets

Jaerim Choi ()

No 202006, Working Papers from University of Hawaii at Manoa, Department of Economics

Abstract: This paper develops a multi-country, multi-sector, and multi-factor model of two-sided matching between heterogeneous workers and entrepreneurs in which agents in different countries can form cross-country teams. Sorting, matching, and sharing problems are all considered in a unified framework. Equilibrium is characterized by endogenous sharing rules, which break away from competitive marginal productivity theories of factor returns. I illustrate that a reduction in the cost of sector-specific matching can increase welfare for all agents without conflicts of interest, and that a bilateral economic integration agreement can affect the welfare of agents in an unrelated third country. Furthermore, I demonstrate that rising income inequality can be accompanied by strengthening negative assortative matching.

Keywords: Two-Sided Matching; Sorting; Matching; Offshoring; Economic Integration Agreement (search for similar items in EconPapers)
JEL-codes: C78 D33 D50 F23 F66 J20 J31 (search for similar items in EconPapers)
Date: 2020-03
New Economics Papers: this item is included in nep-lma and nep-ore
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http://www.economics.hawaii.edu/research/workingpapers/WP_20-06.pdf First version, 2020 (application/pdf)

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Journal Article: Two-sided heterogeneity, endogenous sharing, and international matching markets (2021)
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