We analyze the role of optimal income taxation across different locations. Existing federal income tax schedules have a distortionary effect and result in the misallocation of labor across cities of different size. Because of higher productivity in big cities, wages for identically skilled...

We argue that using wage data alone, it is virtually impossible to identify whether Assortative Matching between worker and firm types is positive or negative. In standard competitive matching models the wages are determined by the marginal contribution of a worker, and the marginal...

We analyze the efficiency properties of price posting in a market where sellers compete for the buyers' business. They key feature of the approach is to investigate price posting as an equilibrium outcome even if sellers can compete with other mechanisms. When buyers are homogeneous, we show...

skill distribution has a long right tail, even if ex ante all agents are identical.

When firms choose the allocation of workers, they can adjust not only the type of worker, the extensive margin, but also the intensive margin, how many of those worker to employ. We propose a tractable matching model with such factor intensity. Positive sorting arises under...

How does the distribution of assets affect job search decisions? We analyze unemployed workers and how their asset holdings affect the allocation to jobs of different productivity. In the absence of insurance, workers with low asset holdings direct their search to low productivity jobs because...

We consider sufficient conditions for uniqueness in two-sided matching models with transfers. We analyse the strategy-proofness of allocation mechanism

This paper extends the classic dynamic employer learning model to a setting where there is uncertainty about the productivity value of general human capital, rather than about match-specific value. The focus is on rent extraction, which involves asymmetric common value auctions. Despite employer...

Because of sorting, more skilled workers are more productive in higher type firms. They also learn at different rates about their productivity and therefore expect different wage paths across firms. We show that under strict supermodularity there is always Positive Assortative Matching:...