American Economic Review: Vol. 104 No. 5 (May 2014)


Quick Tools:

Print Article Summary
Export Citation
Sign up for Email Alerts Follow us on Twitter


AER - All Issues

AER Forthcoming Articles

Investment Incentives in Labor Market Matching

Article Citation

Hatfield, John William, Fuhito Kojima, and Scott Duke Kominers. 2014. "Investment Incentives in Labor Market Matching." American Economic Review, 104(5): 436-41.

DOI: 10.1257/aer.104.5.436


We provide an illustration of how the design of labor market clearing mechanisms can affect incentives for human capital acquisition. Specifically, we extend the labor market matching model (with discrete transfers) of Kelso and Crawford (1982) to incorporate the possibility that agents may invest in human capital before matching. We show that in this setting, the worker-optimal stable matching mechanism incentivizes workers to make (nearly) efficient human capital investments. En route to our main result, we show that so long as the space of salaries is sufficiently rich, every stable outcome in the Kelso and Crawford (1982) setting is approximately efficient.

Article Full-Text Access

Full-text Article

Additional Materials


Hatfield, John William (U TX)
Kojima, Fuhito (Stanford U)
Kominers, Scott Duke (Harvard U)

JEL Classifications

C78: Bargaining Theory; Matching Theory
D82: Asymmetric and Private Information; Mechanism Design
J24: Human Capital; Skills; Occupational Choice; Labor Productivity
J41: Labor Contracts

American Economic Review

Quick Tools:

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)


AER - All Issues

AER - Forthcoming Articles

Virtual Field Journals

AEA Member Login:

AEAweb | AEA Journals | Contact Us