Latent indices in assortative matching models
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Diamond_et_al-2017-Quantitative_Economics.pdf
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467.68 KB
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Author(s)
Diamond, William
Agarwal, Nikhil
Date Issued
November 2017
Journal
Quantitative Economics
Publisher
The Econometric Society
Citation
Diamond, William, and Agarwal, Nikhil. “Latent Indices in Assortative Matching Models.” Quantitative Economics 8, 3 (November 2017): 685–728 © 2017 The Authors
Version
Final published version
Abstract
A large class of two-sided matching models that include both transferable and non-transferable utility result in positive assortative matching along a latent index. Data from matching markets, however, may not exhibit perfect assortativity due to the presence of unobserved characteristics. This paper studies the identification and estimation of such models. We show that the distribution of the latent index is not identified when data from one-to-one matches are observed. Remarkably, the model is nonparametrically identified using data in a single large market when each agent on one side has at least two matched partners. The additional empirical content in many-to-one matches is demonstrated using simulations and stylized examples. We then derive asymptotic properties of a minimum distance estimator as the size of the market increases, allowing estimation using dependent data from a single large matching market. The nature of the dependence requires modification of existing empirical process techniques to obtain a limit theorem. Keywords: matching; identification; estimation
MIT Department
Massachusetts Institute of Technology. Department of Economics
Terms of Use
Creative Commons Attribution-NonCommercial 4.0 International
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.3982/QE736
