The Econometrics of Matching with Transferable Utility: A Progress Report

TL;DR

This paper reviews recent advances in the econometrics of transferable utility matching markets, highlighting robustness of the separable approach and discussing data challenges.

Contribution

It synthesizes recent methodological developments and provides insights into the robustness and data requirements of the separable utility approach.

Findings

Separable approach is robust to omitted variables and non-separabilities.

Combines theoretical and simulation evidence.

Discusses data limitations and imbalanced datasets.

Abstract

Since Choo and Siow (2006), a burgeoning literature has analyzed matching markets when utility is perfectly transferable and the joint surplus is separable. We take stock of recent methodological developments in this area. Combining theoretical arguments and simulations, we show that the separable approach is reasonably robust to omitted variables and/or non-separabilities. We conclude with a caveat on data requirements and imbalanced datasets.