Efficiency of Thin and Thick Markets

Li Gan () and Qi Li

No 10815, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: J6 J4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin
Date: 2004-10
Note: LS
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