The Comparative Statics of Sorting
American Economic Review
vol. 114,
no. 3, March 2024
(pp. 709-51)
Abstract
We create a general and tractable theory of increasing sorting in pairwise matching models with monetary transfers. The positive quadrant dependence partial order subsumes Becker (1973) as the extreme cases with most and least sorting and implies increasing regression coefficients. Our theory turns on synergy—the cross-partial difference or derivative of match production. This reflects basic economic forces: diminishing returns, technological convexity, insurance, and learning dynamics. We prove sorting increases if match synergy globally increases, and is cross-sectionally monotone or single crossing. We use our results to derive sorting predictions in major economics sorting papers and in new applications.Citation
Anderson, Axel, and Lones Smith. 2024. "The Comparative Statics of Sorting." American Economic Review, 114 (3): 709-51. DOI: 10.1257/aer.20210890Additional Materials
JEL Classification
- C78 Bargaining Theory; Matching Theory
- D21 Firm Behavior: Theory
- D82 Asymmetric and Private Information; Mechanism Design
- D86 Economics of Contract: Theory
- J12 Marriage; Marital Dissolution; Family Structure; Domestic Abuse