The Timing of Education

Abstract

We study an assignment-with-investment model to highlight a tradeoff between investment in human capital before (ex ante system) and after (ex post system) matching on the labor market. The ex post system is better at coordinating investment within firms whereas the ex ante system is better at reducing mismatches. We further show that the ability to transfer surplus within firms affects mismatches and the relative performance of the two systems. At high degrees of transferability, they are equivalent. But when transferability is very low, the ex post system outperforms the ex ante system, although with moderate transferability the reverse is true.

Investing in Skill and Searching for Coworkers: Endogenous Participation in a Matching Market

“…Specifically, the multiplicity of robust equilibria disappears. 4 In recognizing that agents take conscious efforts to improve their matching-related outcomes, our model is related to a literature on pre-match investment (e.g., Nöldeke and Samuelson 2014;Mailath, Postlewaite, and Samuelson 2013a;Mailath, Postlewaite, and Samuelson 2013b;Hatfield, Kojima, and Kominers 2014;Peters and Siow 2002;Cole, Mailath, and Postlewaite 2001;Iyigun and Walsh 2007;Zhang 1994;Anderson and Bidner 2015;Gall, Legros, and Newman 2012;Gall, Legros, and Newman 2006;Booth and Coles 2010;and Felli and Roberts 2002). The feature that investment facilitates assortative matching on types makes the analysis particularly related to the smaller literature on pre-match investment with imperfect information (Hopkins 2012;Hoppe, Moldovanu, and Sela 2009;Bidner 2010;and Bidner 2014).…”

Premuneration Values and Investments in Matching Markets

“…Our analysis shows that this efficiency rests on both ex post competition and complete information, with the latter allowing prices to be conditioned on both worker and firm characteristics. Gall, Legros, andNewman (2006, 2009) and Bhaskar and Hopkins (2011) examine an alternative class of models in which information is complete and hence different prices can be set for different workers, but inefficiencies arise out of limitations on the ability to reallocate the surplus in a match via transfers, including limiting cases in which no transfers can be made. In contrast to these models, monetary transfers allow us to achieve any division of the surplus between a pair of matched agents.…”

Health, SES, and the timing of education among military retirees

“…In certain countries and among particular subgroups, delay is common. Gall, Legros and Newman (2006) illustrate how the timing of education varies significantly across the OECD, with the narrowest distribution (2 years difference between the 20 th and 80 th percentiles of age at tertiary education) observed in Ireland and the widest in New Zealand, Norway, and Sweden (20 years). They and Sjögren and Saez-Marti (2004) construct theoretical models of the timing of education based on matching processes or uncertainty in returns and the price of time.…”