Montalvao-Machado, JMDC; (2014) Essays on Complementarities in Bipartite Matching and in Policy Combination. Doctoral thesis , UCL (University College London).

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Abstract

This dissertation contains three essays on the implications of complementarities on the equilibrium sorting in the marriage market, and on the optimal bundling of different development policies. This first chapter develops and tests a model of marital sorting on gender-role attitudes and intrahousehold time allocations with search frictions in the marriage market, and endogenous intrahousehold bargaining power. It is shown that individuals develop a marital taste for similar gender culture partners in order to avoid conflict in decision-making within their future households. This incentive for matching assortatively is stronger for individuals anticipating little say in intrahousehold decision-making. Using data from the British Household Panel Survey, it is shown that the ability that a woman has to guide the extensive margin of her labor market supply according to her own gender-role attitudes, is entirely driven by her search for a same-attitudes partner while in the marriage market. The second chapter provides empirical evidence on whether health education and microfinance act as substitutes or complements in reducing neonatal mortality. Identification exploits the randomized placement of a health educational intervention in rural India, stratified by the presence of a pre-existing microfinance intervention, together with the longitudinal dimension of our dataset. We find that the two interventions substituted each other: both were more effective when offered in isolation then when offered together. Further analysis shows that these interventions operated through different and substitutable channels. The health education intervention increased the adoption of hygienic health behaviours in home deliveries, whereas the microfinance intervention increased payments made to traditional birth attendants. These findings challenge the preconceived policy notion that complementarities between these two ingredients for development call for their joint supply. In contrast, they suggest that policy makers may get more out of each by offering them in isolation to their communities. The final chapter analyses a decentralized two-dimensional marriage market model with transferable utility, where individuals’ attributes are uniformly distributed on the unit square. I first show that matching of likes along both dimensions is the competitive equilibrium when the geometric average within-attribute complementarity is greater than the geometric average between-attribute complementarity. A finding that nests, as a special case, Becker’s assortative matching result, and is in contrast to previous literature suggesting that the concept of assortative matching is not well defined in multi-dimensions. I then show that away from their optimal (similar-type) partners, individuals are willing to compensate mismatches on one of the attributes with opposite mismatches on the other attribute. A finding that in turn sheds new light on the trade-offs that individuals make in less than perfectly competitive multidimensional marriage markets, such as those plagued by search frictions.

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