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Efficiency of Thin and Thick Markets

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  • Li Gan
  • Qi Li

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.

Suggested Citation

  • Li Gan & Qi Li, 2004. "Efficiency of Thin and Thick Markets," NBER Working Papers 10815, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:10815
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    Cited by:

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    3. Philip J. Cook & Jens Ludwig & Sudhir Venkatesh & Anthony A. Braga, 2005. "Underground Gun Markets," NBER Working Papers 11737, National Bureau of Economic Research, Inc.
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    7. Vincent Geloso, 2016. "The Turnover-Reducing Effects of the Minimum Wage may Harm the Economy," Economic Affairs, Wiley Blackwell, vol. 36(3), pages 318-325, October.
    8. Li Gan & Qinghua Zhang, 2006. "The Thick Market Effect on Housing Markets Transactions," NBER Working Papers 12134, National Bureau of Economic Research, Inc.
    9. Kostas Bimpikis & Wedad J. Elmaghraby & Ken Moon & Wenchang Zhang, 2020. "Managing Market Thickness in Online Business-to-Business Markets," Management Science, INFORMS, vol. 66(12), pages 5783-5822, December.
    10. Eugenia Anatolyevna Kolomak, 2018. "Why Cities Emerge and Grow? Explanations of Theoretical and Empirical Studies," Spatial Economics=Prostranstvennaya Ekonomika, Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences (Khabarovsk, Russia), issue 2, pages 134-153.
    11. Li, Hongjun & Li, Qi & Liu, Ruixuan, 2016. "Consistent model specification tests based on k-nearest-neighbor estimation method," Journal of Econometrics, Elsevier, vol. 194(1), pages 187-202.

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    More about this item

    JEL classification:

    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • J4 - Labor and Demographic Economics - - Particular Labor Markets

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