Ahmet Altinok

A welfare-improving reform may fail to obtain majority support. We compare balanced-budget compensation to individuals who do not adapt to a reform with subsidies to those who do. Both policies affect subsequent adaptation decisions. When adaptation costs have a symmetric, weakly single-peaked distribution, and provided that at least one politically feasible transfer exists, the median individual's efficient action identifies the welfare-preferred direction of redistribution: subsidy is preferred if the median should adapt, and compensation if she should not. The same characterization determines whether economic efficiency and broad political support are aligned. Politically feasible compensation is a Pareto improvement and generates unanimous weak support, whereas a politically feasible subsidy necessarily leaves some individuals worse off and the minimum implementing subsidy obtains exactly the required majority. We extend the welfare characterization to some asymmetric distributions and provide an example showing why the distributional conditions matter.

This paper examines the two-sided dynamic matching problem in the US foster care system, where foster parents and children form reversible matches that may separate, persist, or transition to adoption. We first present new empirical facts on match transitions using administrative data. We then develop a two-sided search and matching model to rationalize these facts and generate predictions. Our findings show that a financial penalty on adoption exacerbates the intrinsic disadvantage faced by children with greater care needs and discourages high-quality matches from transitioning to adoption, highlighting important policy implications for improving permanency outcomes in foster care.

This paper studies the menu of licenses designed by the child welfare agency to screen foster parents. We develop a two-sided matching model with heterogeneous agents, search frictions, private information, and a designer who coordinates match formation through a menu of contracts. We focus on incentive-compatible contracts, examine optimal transfers, and analyze sorting patterns that arise in equilibrium. We establish three main results: (i) foster parents in different licenses will never care for the same group of foster children, (ii) complementarities do not ensure that Positive Assortative Matching (PAM) will arise in equilibrium, thus we provide additional condition that guarantees PAM, and (iii) the equilibrium transfer scheme is not unique and does not affect the unique equilibrium sorting pattern. Moreover, our results suggest that an optimal menu of licenses must not only account for the child’s attribute (as it is in practice), but also for other characteristics of the market such as parents’ types, supply of parents, and supply of children.

I study group lending with joint-liability contracts offered by Microfinance Institutions (MFIs). I develop a model of group lending where heterogeneous agents form groups, obtain capital from the MFI, and share risks among themselves. This paper shows that the composition of the groups is not always homogeneous once risk-sharing is introduced, rationalizing the empirical evidence of risk heterogeneity within groups. Moreover, I find that joint-liability introduces inefficiency for risk-averse borrowers, which explains why MFIs are moving away from joint-liability contracts. Surprisingly, the first best can sometimes be achieved even in the presence of information asymmetry.

We study many-to-one matching markets in a dynamic framework with the following features: Matching is irreversible, participants exogenously join the market over time, each agent is restricted by a quota, and agents are perfectly patient. A form of strategic behavior in such markets emerges: The side with many slots can manipulate the subsequent matching market in their favor via earlier matchings. In such a setting, a natural question arises: Can we analyze a dynamic many-to-one matching market as if it were either a static many-to-one or a dynamic one-to-one market? First, we provide sufficient conditions under which the answer is yes. Second, we showthat if these conditions are not met, then the early matchings are “inferior” to the subsequent matchings. Lastly, we extend the model to allow agents on one side to endogenously decide when to join the market. Using this extension,we provide a rationale for the small amount of unraveling observed in the US medical residency matching market compared to the US college-admissions system.