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TAXATION IN MATCHING MARKETS |
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| Authors: | Arnaud Dupuy Alfred Galichon Sonia Jaffe Scott Duke Kominers |
| Institution: | 1. University of Luxembourg and IZA, Luxembourg;2. Departments of Economics and of Mathematics, New York University and Sciences Po, U.S.A.;3. Microsoft, U.S.A.;4. Entrepreneurial Management Unit, Harvard Business School
Department of Economics, Harvard University National Bureau of Economic Research, U.S.A. The authors appreciate the helpful comments of Gary Becker, Pierre-André Chiappori, Raj Chetty, David Cutler, Steven Durlauf, Alexander Frankel, Roland Fryer, Edward Glaeser, Jerry Green, Lars Hansen, John Hatfield, James Heckman, Nathaniel Hendren, Sabrina Howell, Stephanie Hurder, Adam Jaffe, Peter Klibanoff, Fuhito Kojima, David Laibson, Steven Levitt, Robert McCann, Stephen Morris, Kevin Murphy, Yusuke Narita, Charles Nathanson, Derek Neal, Alexandru Nichifor, Kathryn Peters, Philip Reny, Alvin Roth, Larry Samuelson, Florian Scheuer, James Schummer, Robert Shimer, Aloysius Siow, Tayfun Sönmez, E. Glen Weyl, several referees, and the editor, Rakesh Vohra, as well as seminar and conference participants at Aarhus University, the Becker Friedman Institute, the Fields Institute, Harvard University, Northwestern University, the Paris School of Economics, the Rotman School of Management, and the University of Wisconsin-Madison. Dupuy gratefully acknowledges the support of a FNR grant C14/SC/8337045. Galichon gratefully acknowledges the support of NSF grant DMS-1716489, and ERC grant CoG-866274. Jaffe gratefully acknowledges the support of an NSF Graduate Research Fellowship and a Terence M. Considine Fellowship in Law and Economics. Kominers gratefully acknowledges the support of NSF grants CCF-1216095 and SES-1459912, an NSF Graduate Research Fellowship, the Ng Fund and the Mathematics in Economics Fund of the Harvard Center of Mathematical Sciences and Applications, the Harvard Milton Fund, a Terence M. Considine Fellowship in Law and Economics, a Yahoo! Key Scientific Challenges Fellowship, and an AMS–Simons Travel 5. Grant. |
| 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. |
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