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  • May 2014
  • Article
  • American Economic Review: Papers and Proceedings

Investment Incentives in Labor Market Matching

By: John William Hatfield, Fuhito Kojima and Scott Duke Kominers
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Abstract

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.

Keywords

Human Capital; Marketplace Matching

Citation

Hatfield, John William, Fuhito Kojima, and Scott Duke Kominers. "Investment Incentives in Labor Market Matching." American Economic Review: Papers and Proceedings 104, no. 5 (May 2014): 436–441.
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About The Author

Scott Duke Kominers

Entrepreneurial Management
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