Essays in Centralized Market Allocaitons

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Velez Ferro, Santiago
Ozbay, Erkut
A long-standing policy concern in many countries is the difficulty of filling medical positions in rural areas. In Colombia, the Ministry of Health requires newly graduated health professionals to work in a rural or marginalized urban area for a year in order to receive professional certification. The decentralized mechanism used until 2013 to allocate graduates to slots was one that health professionals could manipulate to avoid an assignment. In 2014, a single-offer centralized mechanism that cannot be manipulated to avoid an assignment, based on Gale and Shapley’s deferred acceptance algorithm, was adopted. Following a revealed preference approach, I estimate health professionals’ hospital preferences using the 2014 data. Using these estimates and the fact that under the decentralized mechanism health professionals were able to avoid positions that fall below their acceptance threshold, I obtain the average marginal utility a health professional would require to accept a position by simulating the outcome had the decentralized mechanism still been in use. Then, I simulate the outcome of the centralized mechanism in the absence of the requirement that students accept the assignment determined by the mechanism. I find that, given the choice, about 30% of physicians would be left unassigned, im plying that it is important for the policy’s success that assignments be mandatory. I review many algorithms that have been discussed in the literature and find some that result in significant welfare gains. Finally, I show that, in this setting, there is no evidence that manipulable mechanisms can yield a higher welfare gains.