Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/223770 
Year of Publication: 
2020
Series/Report no.: 
IZA Discussion Papers No. 13328
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We analyze the effects of taxation in two-sided matching markets where agents have heterogeneous preferences over potential partners. Our model provides a continuous link between models of matching with and without transfers. Taxes generate inefficiency on the allocative margin, by changing who matches with whom. This allocative inefficiency can be non-monotonic, but is weakly increasing in the tax rate under linear taxation if each worker has negative non-pecuniary utility of working. We adapt existing econometric methods for markets without taxes to our setting, and estimate preferences in the college-coach football market. We show through simulations that standard methods inaccurately measure deadweight loss.
Subjects: 
matching
taxation
JEL: 
C78
D3
H2
J3
Document Type: 
Working Paper

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