Business Intelligence

An Assignment Model With Match Specific Productivity

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Executive Summary

In this paper, the author develops a dynamic assignment model where matches are subjected to persistent idiosyncratic shocks. The model nests two independent models commonly used in the matching literature that have highlighted different aspects of the data. On one hand, there is ex ante heterogeneity as in traditional assignment models, so the equilibrium distribution of the match surplus between partners depends on the distributions of both types of agent characteristics in the economy (Roy (1951), Tinbergen (1951) and Koopmans and Beckmann (1957)).

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