Cities, Matching and the Productivity Gains of Agglomeration

The striking geographical concentration of economic activities suggests that there are substantial benefits toagglomeration. However, the nature of those benefits remains unclear. In this paper we take advantage of a newdataset to quantify the role of one of the main contenders - the matching of workers and jobs. Using individuallevel data for two large US states we show that thicker urban labour markets are associated with moreassortative matching between workers and firms. Another critical condition is required for this to generatehigher productivity: complementarity of worker and firm quality in the production function. Usingestablishment level productivity regressions, we show that such complementarity is found in our data. Puttingtogether the production and matching relationships, we show that production complementarity and assortativematching is an important source of the urban productivity premium.Urban Productivity, Matching, Agglomeration

Constructing social division to support cooperation : theory and evidence from Nepal

Many societies are divided into multiple smaller groups. The defining feature of these groups is that certain kinds of interaction are more likely to take place within a group than across groups. I build a model in which group divisions are enforced through a reputational penalty for interacting with members of different groups. Agents who interact with members of different groups find that they can support lower levels of cooperation in the future. The model explains why agents may be punished by the other members of their group for interacting with members of different groups and why agents are punished for interacting with members of some groups but not others. I test the empirical implication that there should be less cooperation among members of groups that make up a larger percentage of their communities. I discuss the origin and possible future of social division

Network Formations among Immigrants and Natives

In this paper we examine possible network formations among immigrants and natives with endogenous investment. We consider a model of a network formation where the initiator of the link bears its cost while both agents benefit from it. We present the model by considering possible interactions between immigrants and the new society in the host country: assimilation, separation, integration and marginalization. The paper highlights different aspects of immigrants’ behavior and their interaction with the members of the host country (society) and their source country (society). We found that when the stock of the immigrants in the host country increases, the immigrants' investment in the middlemen increases and the natives may bear the cost of link formation with the middlemen.assimilation and separation, social networks, network formations

Matching Heterogeneous Agents with a Linear Search Technology

Steady state equilibria in heterogeneous agent matching models with search frictions have been shown to exist in Shimer and Smith (2000) under the assumption of a quadratic search technology. We extend their analysis to the commonly investigated linear search technology.Search, Matching, Steady State Equilibrium

A diszkriminációs gyakorlat kialakulása, fennmaradása és belülről fakadó letörése = The Evolution, Maintenance and Endogenous Breakdown of Discriminative Practices

A kutatásban néhány olyan alapvető mechanizmust modelleztünk, amelyek diszkriminációhoz vezetnek a munkaerő-felvétel során. Azt vizsgáltuk, hogy milyen strukturális feltételek valószínűsítik a diszkriminációt és milyen hálózati feltételek mellett kerülhető ez el leginkább. Ágens alapú szimuláció és kísérletek segítségével körvonalaztuk, hogy milyen hálózati és keretezési feltételek segítenek a diszkrimináció endogén csökkentésében. Ezekhez a célokhoz az EU 7. Keretprogram IEF Programjának segítségével nemzetközi kutatói együttműködés létesült F. Squazzonival, M. Castellanival (University of Brescia) és G. Bravoval (University of Torino). A laboratóriumi kísérleteket Bresciában és Budapesten végeztük. Kulcseredményünk, hogy nagy egyenlőtlenségek lehetnek a munkaerő-felvételben akkor is, ha nincs minőségbeli különbség a különböző kategóriákba tartozó munkások között és a munkaadók alapvető célja a legjobb munkások felvétele. Az ágens alapú modellünkben megmutattuk, hogy a társas kapcsolatoknak különböző hatása lehet a diszkriminációra attól függően, hogy milyen típusú kapcsolatokról beszélünk. Továbbá, mind a szimuláció, mind a laboratóriumi kísérletek megerősítették, hogy a túlzott elvárások magasabb diszkriminációs szintet eredményeznek. Az eredményeinket számos nemzetközi konferencián prezentáltuk, valamint nemzetközi folyóiratokhoz küldtük publikálásra. A kísérleti eredményekből egy bírált könyvfejezet a Wiley kiadónál és egy műhelytanulmány már megjelent Torinóban. | In this research project we modeled certain fundamental mechanisms that lead to discriminative practices in hiring. We analyzed under which structural configurations discrimination is likely to occur and under which network conditions they can be avoided. With the help of agent-based simulation and laboratory experiments, we demonstrated how discrimination can be decreased by social network and priming mechanisms. For these objectives and with the support of the FP7 IEF Program of the European Union, an international collaboration has been established with F. Squazzoni and M. Castellani (University of Brescia) and G. Bravo (University of Torino). Laboratory experiments have been conducted in Brescia and in Budapest. Our key finding was that large inequality in employment can be pervasive even when there are no differences in average quality between different worker categories and employers only strive for high quality workers. In our agent-based model we showed that social networks might have a different impact on discrimination depending on the type of network ties. In addition, both simulations and laboratory experiments confirmed that high aspirations can lead to a higher extent of discrimination. Results have been presented at several international conferences and are now submitted for publication to international journals. A reviewed book chapter by Wiley and a working paper in Torino summarizing experimental results have already been published

Monotone Matching in Perfect and Imperfect Worlds

We study frictionless matching models in large production economies with and without market imperfections and/or incentive problems. We provide necessary and sufficient distribution-free conditions for monotone matching which depend on the relationship between what we call the segregation payoff -- a generalization of the individually rational payoff -- and the feasible set for a pair of types. Our approach yields some new techniques for computing equilibria, particularly when utility is not transferable. It also helps to underscore the effects of imperfections, which have two distinct effects that are relevant for equilibrium matching patterns: they can overwhelm the complementarity properties of the production technology and they can introduce nontransferabilities that make equilibrium matching inefficient. We also use our framework to reveal the source of differences in the comparative static properties of some models in the literature and to explore the effects of distribution on the equilibrium matching pattern

Wage Gaps Large and Small

The law of one wage does not strictly hold, nor should it be expected to hold, in contemporary labor markets. The law of one wage, however, provides a surprisingly good first approximation of the structure of U.S. wages. This generalization is drawn from research on a diverse set of topics: the Mincerian wage equation and earnings imputation, union wage differentials, product market regulation and the labor market, wages in male and female jobs, the wage effects of military service, and inter-area wages and cost of living. Working Paper 08-1

The Bargaining Trap

I revisit the Rubinstein (1982) model for the classic problem of price hag- gling and show that bargaining can become a “trap,” where equilibrium leaves one party strictly worse off than if no transaction took place (e.g., the equilibrium price exceeds a buyer’s valuation). This arises when one party is impatient about capturing zero surplus (e.g., Rubinstein’s example of fixed bargaining costs). Augmenting the protocol with unilateral exit options for responding bargainers generally removes the trap