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Does Online Search Crowd Out Traditional Search and Improve Matching Efficiency? Evidence from Craigslist

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  • Kroft, Kory
  • Pope, Devin G.

Abstract

Ever since the seminal work of Stigler (1962), economists have recognized that information in markets is costly to acquire and can lead to “search frictions†. The remarkable growth in online search has substantially lowered the cost of information acquisition. Despite this, there is little evidence concerning the extent to which this has altered the search process and raised overall matching efficiency. To address this issue, we analyze the expansion of the website "Craigslist", which allows users to post job ads and apartment and housing rental ads at virtually no cost. Exploiting the sharp geographic and temporal variation in the availability of online search, induced by Craigslist, we produce three key findings: Craigslist significantly lowered classified job advertisements in newspapers, caused a significant reduction in the apartment and housing rental vacancy rate, and had no effect on the unemployment rate.

Suggested Citation

  • Kroft, Kory & Pope, Devin G., 2012. "Does Online Search Crowd Out Traditional Search and Improve Matching Efficiency? Evidence from Craigslist," CLSSRN working papers clsrn_admin-2012-35, Vancouver School of Economics, revised 30 Nov 2012.
    • Handle: RePEc:ubc:clssrn:clsrn_admin-2012-35
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    More about this item

    Keywords

    Internet; Craigslist; matching; unemployment; vacancies;
    All these keywords.

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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