Efficiency of Thin and Thick Markets

University of Texas at Austin Department of Economics Working Paper

35 Pages Posted: 15 May 2003

See all articles by Li Gan

Li Gan

Texas A&M University - Department of Economics; National Bureau of Economic Research (NBER)

Qi Li

Texas A&M University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: October 2002

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.

Keywords: thin and thick market, matching function, market efficiency, empirical test

Suggested Citation

Gan, Li and Li, Qi, Efficiency of Thin and Thick Markets (October 2002). University of Texas at Austin Department of Economics Working Paper. Available at SSRN: https://ssrn.com/abstract=349320 or http://dx.doi.org/10.2139/ssrn.349320

Li Gan (Contact Author)

Texas A&M University - Department of Economics ( email )

5201 University Blvd.
College Station, TX 77843-4228
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Qi Li

Texas A&M University - Department of Economics ( email )

5201 University Blvd.
College Station, TX 77843-4228
United States
979-845-7349 (Phone)

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