TAXATION IN MATCHING MARKETS

Arnaud Dupuy, Alfred Galichon, Sonia Jaffe, Scott Duke Kominers

    Research output: Contribution to journalArticlepeer-review

    Abstract

    We analyze the effects of taxation in two-sided matching markets where agents have heterogeneous preferences over potential partners. Our model provides a continuous link between models of matching with and without transfers. Taxes generate inefficiency on the allocative margin, by changing who matches with whom. This allocative inefficiency can be nonmonotonic, but is weakly increasing in the tax rate under linear taxation if each worker has negative nonpecuniary utility of working. We adapt existing econometric methods for markets without taxes to our setting, and estimate preferences in the college-coach football market. We show through simulations that standard methods inaccurately measure deadweight loss.

    Original languageEnglish (US)
    Pages (from-to)1591-1634
    Number of pages44
    JournalInternational Economic Review
    Volume61
    Issue number4
    DOIs
    StatePublished - Nov 2020

    ASJC Scopus subject areas

    • Economics and Econometrics

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