Working Paper: NBER ID: w11506
Authors: Jeremy Bulow; Jonathan Levin
Abstract: We develop a model in which firms set impersonal salary levels before matching with workers. \nSalaries fall relative to any competitive equilibrium while profits rise by almost as much, implying \nlittle inefficiency. Furthermore, the best firms gain the most from the system while wages become \ncompressed. We discuss the performance of alternative institutions and the recent antitrust case \nagainst the National Residency Matching Program in light of our results.
Keywords: No keywords provided
JEL Codes: D44; J41; L44
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| impersonal salary setting (M52) | lower wages (J31) |
| impersonal salary setting (M52) | higher profits (D33) |
| residency matching process (C78) | lower salaries (J31) |
| impersonal salary setting (M52) | dampened competition among hospitals (L12) |
| lower wages (J31) | higher profits (D33) |
| compression of wages (J31) | largest reductions in salary for best residents (J39) |
| incremental surplus differentials (F12) | higher-ranked hospitals benefit more (I14) |