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Efficiency of Thin and Thick Markets

  • Li Gan
  • Qi Li

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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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
Date of revision:
Publication status: published as Gan, Li & Li, Qi, 2016. "Efficiency of thin and thick markets," Journal of Econometrics, Elsevier, vol. 192(1), pages 40-54.
Handle: RePEc:nbr:nberwo:10815
Note: LS
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