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Abstract

This paper develops some general conditions under which complementarities between individual agents imply that assortative matching is efficient. Our analysis has four main findings. First, when agents are organized into equal-sized groups, just as in Becker (1973), the presence of within-group complementarities is sufficient for stratification to be efficient. Second, if group sizes vary, assortative matching may not be efficient even though complementarities are present, unless particular functional form assumptions are imposed. Third, the connection between assortative matching, complementarities and efficiency reemerges if one considers sequences of replications of the economy in which individual coalitions are uniformly bounded in size. Fourth, the presence of feedbacks from the composition of group memberships has important effects on efficient allocations and breaks any simple link between assortative matching and efficiency. Together, these results suggest that the characterization of the cross-section evolution of an efficiently sorted economy is likely to be highly complex.

Keywords and Phrases: Assortative matching, Matching models.

JEL Classification Numbers: J41.

Received: September 25, 2001; revised version: February 26, 2002
RID="*"
ID="*" We thank William Brock for many helpful conversations and Scott Page for detailed comments on an earlier draft of this paper. The National Science Foundation, John D. and Catherine T. MacArthur Foundation and Center for Urban Land Economic Research have generously provided financial support.
Correspondence to: S. N. Durlauf

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