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Journal Publication

Risky Matching

Published: June 2021
Researchers developed a model to test the willingness of risk-averse workers to invest in high-cost skill acquisition, seeking to understand factors that explain inequality in the work force.

In researchers' model, workers are faced with various risks at the investment stage of skill acquisition, including level of skill upon completion of investment and level of income shock realization. In two versions of the model, researchers vary the timeline of uncertainty resolution, which determines the available risk-sharing possibilities between workers and firms. In a stylized quantitative assessment of the model evaluating the sources (risk, heterogeneity, or technology) of rising U.S. wage inequality, researchers find that changes in risk were the most important driver behind the surge in inequality, followed by technological change.

Abstract and Citation

Hector Chade, Ilse Lindenlaub, Risky Matching, The Review of Economic Studies, Volume 89, Issue 2, March 2022, Pages 626–665,