Wage Formation in a Centralized Matching Market

Abstract

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.It is natural to ask why the market for interns in the U.S.A. has to be cleared with a centralized matching procedure (the NRMP) and how this rationing procedure affects equilibrium wages. This paper presents a model in which a market failure is caused by insufficiently differentiated wages. The NRMP solves the problem, but it enables the hospitals to extract more surplus from their interns than they could in an ideal competitive equilibrium. It is demonstrated that this distortion causes welfare losses if the hospitals can substitute between physicians and interns.

Matching and Price Competition

“…It is also worth noting that in the context of medical fellowships, where a centralized matching process is used for some but not all subspecialties, salaries appear to be low across the board and do not seem to depend much on whether the market is centralized (Muriel Niederle and Roth, 2003). See also Ulrich Kamecke (1998) for an alternative model of low salaries in matching markets. 8 The model also has some relevance for the study of multi-unit auctions and price discrimination in product markets (see Bulow and Levin, 2003, for discussion).…”

The Gastroenterology Fellowship Market: Should There Be a Match?

“…They note that many labor markets that do not use a match also often have impersonal wages: they mention law, investment banking, and academia. Bulow and Levin (2003) show that a market with nonpersonalized wages tends to lower the average wage and compress the wages of applicants compared to a competitive market (see also Ulrich Kamecke, 1998).…”

¿Qué hemos aprendido del diseño de mercados?

“…7 Bulow y Levin (2006) esbozan un modelo simple de convergencia uno a uno en el que un servicio de colocación centralizado, al aplicar salarios impersonales (es decir, el mismo salario para todos los candidatos aceptados) podría generar una presión a la baja en los salarios (véase también Kamecke, 1998). El análisis posterior sugiere un mayor escepticismo acerca de cualquier efecto a la baja en los salarios de los mercados laborales médicos reales.…”