Matching and a technology-induced skewness in income distributions

This paper examines a source of skewness in income distribution which is technology-based. A simple competitive matching model is constructed in which agents of two types freely from 'firms' to produce a single good. We derive explicit expressions relating the skewness in the income distributions to characteristics in the production function. It is found that labor input complementarity guarantees the existence of an elistist, efficient equilibrium and imparts a positive skewness to the income distributions, while concavity tends to skew the distributions the opposite way. An application to the problem of allocating scarce educational resources according to talent is studied. © 1992