Repugnance as a Constraint on Markets

This essay examines how repugnance sometimes constrains what transactions and markets we see. When my colleagues and I have helped design markets and allocation procedures, we have often found that distaste for certain kinds of transactions is a real constraint, every bit as real as the constraints imposed by technology or by the requirements of incentives and efficiency. I'll first consider a range of examples, from slavery and indentured servitude (which once were not as repugnant as they now are) to lending money for interest (which used to be widely repugnant and is now not), and from bans on eating horse meat in California to bans on dwarf tossing in France. An example of special interest will be the widespread laws against the buying and selling of organs for transplantation. The historical record suggests that while repugnance can change over time, change can be quite slow.

Philanthropically Funded Heroism Awards for Kidney Donors?

Denna rapport är den andra av två delarbeten (det tidigare publicerades i samma rapportserie 2004) som är ett resultat av ett samarbete mellan Centrum för utvärdering av medicinsk teknologi och Landstinget i Östergötland. Målet har varit att utveckla beslutsunderlaget för öppna horisontella prioriteringar inom landstinget i Östergötland genom att fördela alla kostnader för sjukdom och ohälsa på olika sjukdomsgrupper. Vi som har arbetat med denna rapport är Andrea Schmidt, hälsoekonom vid CMT, Institutionen för medicin och hälsa (IMH) samt Agneta Andersson, Fil Dr, forskare vid Socialmedicin och folkhälsovetenskap (IMH) samt FoU-handledare vid FoU-enheten för Närsjukvård vid Landstinget i Östergötland. Vi vill rikta ett stort tack till Lars Svensson, Rolf Wiklund samt Bengt Grip, KPP-gruppen vid Landstinget i Östergötland. Utan er hjälp och bistånd med data hade detta projekt inte varit genomförbart. Linköping 2007 Andrea Schmidt           Agneta Andersso

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.

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.

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.