Search Results
Working Paper
Targeted search in matching markets
We propose a parsimonious matching model where people's choice of whom to meet endogenizes the degree of randomness in matching. The analysis highlights the interaction between a productive motive, driven by the surplus attainable in a match, and a strategic motive, driven by reciprocity of interest of potential matches. We find that the interaction between these two motives differs with preferences ? vertical versus horizontal ? and that this interaction implies that preferences estimated using our model can look markedly different from those estimated using a model where the degree of ...
Working Paper
The rigidity of choice: Lifecycle savings with information-processing limits
This paper studies the implications of information-processing limits on the consumption and savings behavior of households through time. It presents a dynamic model in which consumers rationally choose the size and scope of the information they want to process concerning their financial possibilities, constrained by a Shannon channel. The model predicts that people with higher degrees of risk aversion rationally choose more information. This happens for precautionary reasons since, with finite processing rate, risk averse consumers prefer to be well informed about their financial ...
Calibrating central bank inflation messages is key to policy success
A well-crafted message about the current and future state of the economy can influence the private sector’s expectations and guide behavior to ensure that the economy remains strong and prices stable even amid threatening supply-and-demand shocks.
Working Paper
Marriage Market Sorting in the U.S.
We study the multidimensional sorting of males and females in the U.S. marriage market over the past decade using a model of targeted search. We find strong vertical sorting on income and education, and horizontal sorting on race. We find that women put significant effort into targeting men at the top of the desirability scale, while men put less effort and target women with similar characteristics. We find no improvement in quality of matching and no noticeable changes in sorting patterns or individual search behavior, despite rapid improvement in search technology. Finally, we find that ...
Working Paper
Marriage Market Sorting in the U.S.
We examine shifts in the U.S. marriage market, assessing how online dating, demographic changes, and evolving societal norms influence mate choice and broader sorting trends. Using a targeted search model, we analyze mate selection based on factors such as education, age, race, income, and skill. Intriguingly, despite the rise of online dating, preferences, mate choice, and overall sorting patterns showed negligible change from 2008 to 2021. However, a longer historical view from 1960 to 2020 reveals a trend toward preferences for similarity, particularly concerning income, education, and ...
Marrying for Money Ends Up Reducing Income Inequality
The marriage market constitutes a way to ameliorate income inequality in the U.S. and to create bridges across the income ladder.
Working Paper
Experimental evidence on rational inattention
We show that rational inattention theory of Sims (2003) provides a rationalization of choice models la Luce and gives a structural interpretation to probability curvature parameters as reflecting costs of processing information. We use data from a behavioral experiment to show that people behave according to predictions of the theory. We estimate attitudes to risk and costs of information for individual participants and document overwhelming heterogeneity in these parameters among a relatively homogeneous sample of people. We characterize, both theoretically and empirically, the aggregation ...
Working Paper
Marriage Market Sorting in the U.S.
We examine shifts in the U.S. marriage market, assessing how online dating, demographic changes, and evolving societal norms influence mate choice and broader sorting trends. Using a targeted search model, we analyze mate selection based on factors such as education, age, race, income, and skill. Intriguingly, despite the rise of online dating, preferences, mate choice, and overall sorting patterns showed negligible change from 2008 to 2021. However, a longer historical view from 1960 to 2020 reveals a trend toward preferences for similarity, particularly concerning income, education, and ...
Working Paper
The rigidity of labor: processing savings and work decisions through Shannon's channels
This paper argues that constraining people to choose consumption and labor under finite Shannon capacity produces results in line with U.S. business cycle data. My model has a simple partial equilibrium setting in which risk averse consumers keep high labor supply and low consumption profile at early stage of life to hedge against wealth fluctuations. They rationally choose to keep consumption and labor unchanged until they collect enough information. I find that at high frequency consumption appears to be more sluggish than labor supply. However, when people decide to change consumption they ...
Journal Article
'Rational inattention' guides overloaded brains, helps economists understand market behavior
Between Internet news sources, social media and email, people are awash in information, most of it accessible at near-zero cost. Yet, humans possess only a finite capacity to process all of it. The average email user, for example, receives dozens of messages per day. The messages can?t all receive equal attention. How carefully does someone read an email from a sibling or friend before crafting a reply? How closely does a person read an email from the boss?> ; Limitations on the ability to process information force people to make choices regarding the subjects to which they pay more or less ...