Taxation in Matching Markets

61 Pages Posted: 9 Jun 2020

See all articles by Arnaud Dupuy

Arnaud Dupuy

Centre de Recherche en Économie Appliquée (CREA)

Alfred Galichon

NYU, Department of Economics and Courant Institute

Sonia Jaffe

University of Chicago

Scott Duke Kominers

Harvard University; a16z crypto

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 non-monotonic, but is weakly increasing in the tax rate under linear taxation if each worker has negative non-pecuniary 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.

Keywords: matching, taxation

JEL Classification: C78, D3, H2, J3

Suggested Citation

Dupuy, Arnaud and Galichon, Alfred and Jaffe, Sonia and Kominers, Scott Duke, Taxation in Matching Markets. IZA Discussion Paper No. 13328, Available at SSRN: https://ssrn.com/abstract=3620643 or http://dx.doi.org/10.2139/ssrn.3620643

Arnaud Dupuy (Contact Author)

Centre de Recherche en Économie Appliquée (CREA) ( email )

Campus Limpertsberg
162A, avenue de la Faïencerie
Luxembourg, 1511
Luxembourg

Alfred Galichon

NYU, Department of Economics and Courant Institute ( email )

269 Mercer Street, 7th Floor
New York, NY 10011
United States

Sonia Jaffe

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Scott Duke Kominers

Harvard University ( email )

Rock Center
Harvard Business School
Boston, MA 02163
United States

HOME PAGE: http://www.scottkom.com/

a16z crypto ( email )

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