Unraveling Reduces the Scope of an Entry Level Labor Market: Gastroenterology With and Without a Centralized Match

From 1986 through 1997 the entry-level market for American gastroenterologists was organized by a centralized clearinghouse. Before, and since, it has been conducted via a decentralized market in which appointment dates have unraveled to well over a year before the start of employment. The career paths of gastroenterologists therefore offer a unique opportunity to examine the difference between the market when appointments are decentralized and early, versus when they are made later via a centralized clearinghouse. (Most centralized clearinghouses remain in use once established, and so there is no way to separate changes due to the clearinghouse from other changes that may have taken place over time.) We find that, both before and after the years in which the centralized clearinghouse was used, gastroenterologists are less mobile, and more likely to be employed at the same hospital in which they were internal medicine residents, than when the clearinghouse was in use. This suggests that the clearinghouse serves not only to coordinate the timing of appointments, but that it also increases the scope of the market, compared to decentralized markets with early appointments and exploding offers. This has implications for theories of market failure due to unraveling over time.

The Effects of a Centralized Clearinghouse on Job Placement, Wages, and Hiring Practices

New gastroenterologists participated in a labor market clearinghouse (a "match") from 1986 through the late 1990's, after which the match was abandoned. This provides an opportunity to study the effects of a match, by observing the differences in the outcomes and organization of the market when a match was operating, and when it was not. After the GI match ended, the market unraveled. Contracts were signed earlier each year, at diffuse times, often with exploding offers. The market became less national, more local. This allows us to discern the effect of the clearinghouse: it coordinated the timing of the market, in a way that increased its thickness and scope. The clearinghouse does not seem to have had an effect on wages. As this became known among gastroenterologists, an opportunity arose to reorganize the market to once again use a centralized clearinghouse. However it proved necessary to adopt policies that would allow employers to safely delay hiring and coordinate on using the clearinghouse. The market for gastroenterologists provides a case study of market failures, the way a centralized clearinghouse can fix them, and the effects on market outcomes. In the conclusion we discuss aspects of the experience of the gastroenterology labor market that seem to generalize fairly widely.

Market Culture: How Norms Governing Exploding Offers Affect Market Performance

Many markets have organizations that influence or try to establish norms concerning when offers can be made, accepted and rejected. Examining a dozen previously studied markets suggests that markets in which transactions are made far in advance are markets in which it is acceptable for firms to make exploding offers, and unacceptable for workers to renege on commitments they make, however early. But this evidence is only suggestive, because the markets differ in many ways other than norms concerning offers. Laboratory experiments allow us to isolate the effects of exploding offers and binding acceptances. In a simple environment, in which uncertainty about applicants' quality is resolved over time, we find inefficient early contracting when firms can make exploding offers and applicants' acceptances are binding. Relaxing either of these two conditions causes matching to take place later, when more information about applicants' qualities is available, and consequently results in higher efficiency and fewer blocking pairs. This suggests that elements of market culture may play an important role in influencing market performance.

The Internal Job Market of the IMF's Economist Program

This paper shows how the internal job market for participants in the IMF's Economist Program (EPs) could be redesigned to eliminate most of the shortcomings of the current system. The new design is based on Gale and Shapley's (1962) deferred acceptance algorithm and generates an efficient and stable outcome. An Excel-based computer program, EP-Match, implements the algorithm and applies it to the internal job market for EPs. The program can be downloaded from http://www.people.hbs.edu/gbarron/EP-Match_for_Excel.htm. Copyright 2005, International Monetary Fund

The collapse of a medical clearinghouse (and why such failures are rare)

The collapse of the clearinghouse for the entry-level gastroenterology labor market offers a unique opportunity to study how stable clearinghouses succeed and fail. To explore the reasons for the failure of the clearinghouse (and why failures of this kind of clearinghouse have been so rare), we conduct an experimental investigation of demand shocks of the kind that occurred in the gastroenterology market. We find that a reduction in demand for positions leads to the collapse of the match only when it is detectable by firms before being detected by workers (as in the unexpected shock that took place in 1996, which could be seen by firms in their reduced applicant pools). Simple demand and supply imbalances do not seem to interfere with the operation of the centralized match. Our results suggest an affirmative answer to the question posed by market participants about whether the clearinghouse could be successfully restarted, and that this would relieve some of the distress now reported in that market, by allowing it to operate later, at a more uniform time, and with more national scope.