We analyze the role of optimal income taxation across different locations. Existing federal income tax schedules have a distortionary effect and result in the misallocation of labor across cities of different size. Because of higher productivity in big cities, wages for identically skilled...

We argue that using wage data alone, it is virtually impossible to identify whether Assortative Matching between worker and firm types is positive or negative. In standard competitive matching models the wages are determined by the marginal contribution of a worker, and the marginal...

We analyze the efficiency properties of price posting in a market where sellers compete for the buyers' business. They key feature of the approach is to investigate price posting as an equilibrium outcome even if sellers can compete with other mechanisms. When buyers are homogeneous, we show...

skill distribution has a long right tail, even if ex ante all agents are identical.

When firms choose the allocation of workers, they can adjust not only the type of worker, the extensive margin, but also the intensive margin, how many of those worker to employ. We propose a tractable matching model with such factor intensity. Positive sorting arises under...

How does the distribution of assets affect job search decisions? We analyze unemployed workers and how their asset holdings affect the allocation to jobs of different productivity. In the absence of insurance, workers with low asset holdings direct their search to low productivity jobs because...

Assortative Matching between workers and firms provides evidence of the complementarities or substitutes in production. The presence of complementarities is important for policies that aim to achieve the optimal allocation of resources, for example unemployment insurance. We argue that using...

Wages for the vast majority of workers have stagnated since the 1980s while productivity has grown. We investigate two coexisting explanations based on rising market power: 1. Monopsony, where dominant firms exploit the limited mobility of their own workers to pay lower wages; and 2. Monopoly,...

We propose a theory of how market power affects wage inequality. We ask how goods and labor market power jointly affect the level of wages, the Skill Premium, and wage inequality. We then use detailed microdata from the US Census between 1997 and 2016 to estimate the parameters of labor supply,...

We argue that using wage data alone, it is virtually impossible to identify whether Assortative Matching between worker and firm types is positive or negative. In standard competitive matching models the wages are determined by the marginal contribution of a worker, and the marginal contribution...