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Efficiency of Thin and Thick Markets

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  • Li Gan
  • Qi Li
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Abstract

In this paper, we propose a matching model to study the efficiency of thin and thick markets. Our model shows that the probabilities of matches in a thin market are significantly lower than those in a thick market. When applying our results to a job search model, it implies that, if the ratio of job candidates to job openings remains (roughly) a constant, the probability that a person can find a job is higher in a thick market than in a thin market. We apply our matching model to the U.S. academic market for new PhD economists. Consistent with the prediction of our model, a field of specialization with more job openings and more candidates has a higher probability of matching.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10815.

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Date of creation: Oct 2004
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Handle: RePEc:nbr:nberwo:10815

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  1. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
  2. Petrongolo, Barbara & Pissarides, Christopher, 2000. "Looking Into The Black Box: A Survey Of The Matching Function," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2409, C.E.P.R. Discussion Papers.
  3. Blanchard, Olivier Jean & Diamond, Peter A, 1994. "Ranking, Unemployment Duration, and Wages," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 61(3), pages 417-34, July.
  4. Coles, Melvyn G & Smith, Eric, 1998. "Marketplaces and Matching," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 239-54, February.
  5. Muriel Niederle & Alvin E. Roth, 2003. "Unraveling Reduces Mobility in a Labor Market: Gastroenterology with and without a Centralized Match," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 111(6), pages 1342-1352, December.
  6. Ricardo Lagos, 2000. "An Alternative Approach to Search Frictions," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(5), pages 851-873, October.
  7. Chordia, Tarun & Roll, Richard & Subrahmanyam, Avanidhar, 2000. "Commonality in liquidity," Journal of Financial Economics, Elsevier, Elsevier, vol. 56(1), pages 3-28, April.
  8. Roth, Alvin E, 1984. "The Evolution of the Labor Market for Medical Interns and Residents: A Case Study in Game Theory," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 92(6), pages 991-1016, December.
  9. Diamond, Peter A, 1982. "Aggregate Demand Management in Search Equilibrium," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 90(5), pages 881-94, October.
  10. Richard Dusansky & Clayton J. Vernon, 1998. "Rankings of U.S. Economics Departments," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 12(1), pages 157-170, Winter.
  11. Howitt, Peter & McAfee, R Preston, 1987. "Costly Search and Recruiting," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(1), pages 89-107, February.
  12. Howitt, Peter & McAfee, R Preston, 1988. "Stability of Equilibria with Externalities," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 103(2), pages 261-77, May.
  13. Berman, Eli, 1997. "Help Wanted, Job Needed: Estimates of a Matching Function from Employment Service Data," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 15(1), pages S251-92, January.
  14. Lippman, Steven A & McCall, John J, 1986. "An Operational Measure of Liquidity," American Economic Review, American Economic Association, American Economic Association, vol. 76(1), pages 43-55, March.
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Cited by:
  1. FU, Shihe & DONG, Xiaofang & CHAI, Guojun, 2010. "Industry specialization, diversification, churning, and unemployment in Chinese cities," China Economic Review, Elsevier, Elsevier, vol. 21(4), pages 508-520, December.
  2. Philip J. Cook & Jens Ludwig & Sudhir Venkatesh & Anthony A. Braga, 2005. "Underground Gun Markets," NBER Working Papers 11737, National Bureau of Economic Research, Inc.
  3. Li Gan & Qinghua Zhang, 2006. "The Thick Market Effect on Housing Markets Transactions," NBER Working Papers 12134, National Bureau of Economic Research, Inc.

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