Working Paper: NBER ID: w12334
Authors: Muriel Niederle
Abstract: A recent antitrust lawsuit against the National Residency Matching Program renewed interest in understanding the effects of a centralized match on wages of medical residents. Bulow and Levin (forthcoming) propose a simple model of the NRMP, in which firms set impersonal salaries simultaneously, before matching with workers, and show that a match leads to lower aggregate wages compared to any competitive outcome. \n \nThis paper models a feature present in the NRMP, ordered contracts, that allows firms to set several contracts while determining the order in which they try to fill these contracts. I show that the low wage equilibrium of Bulow and Levin is not robust to this feature of the NRMP, and competitive wages are once more an equilibrium outcome. Furthermore, a match with ordered contracts has different properties than former models of centralized matches with multiple contracts.
Keywords: Wages; Centralized Match; Ordered Contracts; Medical Residents
JEL Codes: D4; J3; J4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Introduction of ordered contracts (L14) | Shift from low wage equilibrium to competitive wages (J31) |
| Ordered contracts (D86) | Strict increase in expected payoffs (D81) |
| NRMP's algorithm (C78) | Achieve competitive outcomes (L21) |