James W. Boudreau
Stratification, Growth, and Path Dependence in Two-Sided Markets

Abstract: This paper examines the impact of two-sided market interactions on social mobility and growth. To analyze the dynamic effects of two-sided matching, a heterogeneous population of agents is simulated with the match process acting as a fitness selection mechanism. Even with perfect information and substantial variety in both offspring and entrants, two-sided matching causes the population to evolve into stratified groups. Corrective measures are possible to improve mobility, but by altering the path of market evolution, a policy may have unintended negative impacts on growth, inequality, and welfare.


JEL: C15, D63, O43.
Keywords: stratification, growth, path dependence, matching.



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