NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Efficiency of Thin and Thick Markets

Li Gan, Qi Li

NBER Working Paper No. 10815
Issued in October 2004
NBER Program(s):   LS

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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Document Object Identifier (DOI): 10.3386/w10815

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