Working Paper: NBER ID: w10815
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
JEL Codes: J6; J4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| thicker market (D40) | higher matching probability (C78) |
| increased number of firms and candidates (L19) | decreased unemployment rate (J68) |
| thicker market (D40) | decreased variance of matching probabilities (C78) |
| higher matching probabilities (C78) | more consistent matching outcomes (C52) |
| thicker market (D40) | higher matching probabilities in various fields (C78) |