Research

Abstract: 

This paper studies the allocation of goods in two-sided, one-to-one matching markets with finite time horizons. In these markets, the timing of seller participation distorts the allocation of goods. This is due to dynamic externalities inherent in one-to-one matching markets -- sellers fail to fully consider how their participation impacts the evolution of the market. Using data on Airbnb, I estimate a dynamic structural model of a two-sided matching market in order to quantify externalities related to the timing of seller entry. I evaluate policies that a platform can implement to improve total surplus on its market. Entry subsidies that encourage later entry reduce total welfare by $3 for every $1 spent, while subsidies that encourage earlier entry increase total welfare by $2 for every $1 spent.

Abstract:

Agents often make choices by forming expectations about attributes, but such expectations are usually unobserved by researchers. We develop two methods for estimating discrete choice models where agents use unobserved heterogeneous information sets to form expectations. Preferences are point-identified using a finite mixture approximation of the unobserved information structure or set-identified with partial information. Both methods apply to individual- and market-level data without imposing strong assumptions on how expectations are formed. We revisit two empirical applications that confirm the importance of accounting for unobserved information: firms’ revenue expectations when exporting and consumers’ fuel cost expectations when purchasing cars.

Abstract:

Workers experience labor income risk through volatility in hourly wages, hours worked, and separation into unemployment. Using French administrative and survey data, we investigate how employers adjust each of these margins in response to productivity shocks, thus determining the income risk of their employees. We uncover two novel cross-sectional facts. First, high-paying jobs adjust mainly hourly wages in response to changes in the unemployment rate, at 2.6 times that of low-paying ones. While low-paying jobs adjust primarily working hours and separation rates, at 10-50 times the semi-elasticity of high-paying ones. Second, high-paying jobs have higher costs of creating a vacancy as indicated by survey evidence on longer recruiting time, and difficulties recruiting. We build a dynamic contracting framework where employers differ in their productivity and vacancy cost and show that it qualitatively reconciles these facts. Our theoretical framework and empirical results highlight the importance of considering hourly wages, working hours, and the separation rate as being jointly determined. Consequently, policies that target only one of these margins (e.g. minimum wage, hours constraints, firing cost regulation) can be ineffective due to the endogenous reaction of the other.