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Efficiency of thin and thick markets. (English) Zbl 1419.62506
Summary: 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.

MSC:
62P20 Applications of statistics to economics
62G07 Density estimation
91B40 Labor market, contracts (MSC2010)
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