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Becker Meets Ricardo: Multisector Matching with Communication and Cognitive Skills

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  • Robert J. McCann
  • Xianwen Shi
  • Aloysius Siow
  • Ronald Wolthoff

Abstract

This article presents a tractable framework for studying frictionless matching in education and labor markets when individuals have heterogeneous communication and cognitive skills. In the model, there are gains to specialization and team production, but specialization requires communication and coordination between team members. Individuals accumulate cognitive skills in schools when young. As adults, they decide whether to work as a manager or a worker in a firm or become a teacher in a school. Individuals with more communication skills will become either managers or teachers and earn higher wages. Each manager manages several workers and each teacher teaches several students, with their span of control being determined by their communication skill. These individuals also invest discretely more in education than marginally different individuals who become workers. Equilibrium is equivalent to the solution of an utilitarian social planner solving a linear programming problem.

Suggested Citation

  • Robert J. McCann & Xianwen Shi & Aloysius Siow & Ronald Wolthoff, 2015. "Becker Meets Ricardo: Multisector Matching with Communication and Cognitive Skills," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 31(4), pages 690-720.
    • Handle: RePEc:oup:jleorg:v:31:y:2015:i:4:p:690-720.
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    File URL: http://hdl.handle.net/10.1093/jleo/ewv002
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    Cited by:

    1. Arnaud Dupuy, 2021. "Migration in China: To work or to wed?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 36(4), pages 393-415, June.
    2. Mak, Eric & Siow, Aloysius, 2017. "Occupational Choice and Matching in the Labor Market," IZA Discussion Papers 10584, Institute of Labor Economics (IZA).
    3. Stephen Hansen & Tejas Ramdas & Raffaella Sadun & Joe Fuller, 2021. "The Demand for Executive Skills," NBER Working Papers 28959, National Bureau of Economic Research, Inc.
    4. Pian Shu, 2015. "Innovating in Science and Engineering or "Cashing In" on Wall Street? Evidence on Elite STEM Talent," Harvard Business School Working Papers 16-067, Harvard Business School, revised Nov 2016.
    5. David J. Deming, 2017. "The Growing Importance of Social Skills in the Labor Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(4), pages 1593-1640.
    6. Fumarco, Luca & Baert, Stijn, 2019. "Relative age effect on European adolescents’ social network," Journal of Economic Behavior & Organization, Elsevier, vol. 168(C), pages 318-337.
    7. Job Boerma & Aleh Tsyvinski & Alexander P. Zimin, 2021. "Sorting with Teams," Papers 2109.02730, arXiv.org, revised Nov 2023.
    8. Schultheiss, Tobias & Pfister, Curdin & Gnehm, Ann-Sophie & Backes-Gellner, Uschi, 2023. "Education expansion and high-skill job opportunities for workers: Does a rising tide lift all boats?," Labour Economics, Elsevier, vol. 82(C).

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