The Econometrics of Matching with Transferable Utility: A Progress Report
Pierre-Andre Chiappori, Dam Linh Nguyen, Bernard Salanie
TLDR
This paper reviews recent econometric methods for matching markets with transferable utility, finding the separable approach robust to omitted variables.
Key contributions
- Reviews recent methodological developments in matching markets with transferable utility.
- Examines the separable approach where joint surplus is separable.
- Shows the separable approach is robust to omitted variables and non-separabilities.
- Highlights caveats regarding data requirements and imbalanced datasets.
Why it matters
This paper provides a crucial update on econometric methods for analyzing matching markets, especially those with transferable utility. It validates the robustness of the separable approach, offering confidence to researchers. This helps advance the understanding and application of these complex economic models.
Original Abstract
Since Choo and Siow (2006), a burgeoning literature has analyzed matching markets when utility is perfectly transferable and the joint surplus is separable. We take stock of recent methodological developments in this area. Combining theoretical arguments and simulations, we show that the separable approach is reasonably robust to omitted variables and/or non-separabilities. We conclude with a caveat on data requirements and imbalanced datasets.
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