NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Thick Market Effect on Local Unemployment Rate Fluctuations

Li Gan, Qinghua Zhang

NBER Working Paper No. 11248
Issued in April 2005
NBER Program(s):   LS

This paper studies how the thick market effect influences local unemployment rate fluctuations. The paper presents a model to demonstrate that the average matching quality improves as the number of workers and firms increases. Unemployed workers accumulate in a city until the local labor market reaches a critical minimum size, which leads to cyclical fluctuations in the local unemployment rates. Since larger cities attain the critical market size more frequently, they have shorter unemployment cycles, lower peak unemployment rates, and lower mean unemployment rates. Our empirical tests are consisten with the predictions of the model. In particular, we find that an increase of two standard deviations in city size shortens the unemployment cycles by about 0.72 months, lowers the peak unemployment rates by 0.33 percentage points, and lowers the mean unemployment rates by 0.16 percentage points.

download in pdf format
   (274 K)

email paper

This paper is available as PDF (274 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w11248

Published: Gan, Li and Qinghua Zhang. "The Thick Market Effect on Local Unemployment Rate Fluctuations." Journal of Econometrics 133, 1 (July 2006): 127-152 citation courtesy of

Users who downloaded this paper also downloaded these:
Gan and Zhang w12134 The Thick Market Effect on Housing Markets Transactions
Gan and Li w10815 Efficiency of Thin and Thick Markets
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us