Two-sided heterogeneity, endogenous sharing, and international matching markets

This paper develops a multi-country, multi-sector, and multi-factor model of two-sided matching between heterogeneous workers and entrepreneurs in which agents in different countries can form cross-country teams. Sorting, matching, and sharing problems are all considered in a unified framework. Equilibrium is characterized by endogenous sharing rules, which break away from competitive marginal productivity theories of factor returns. I illustrate that a bilateral economic integration agreement can affect the welfare of agents in an unrelated third country, and that a reduction in the cost of sector-specific matching can increase welfare for all agents without conflicts of interest.