The thick market effect on local unemployment rate fluctuations
By: Li Gan, Qinghua Zhang.
Contributors: Zhang, Qinghua, 1971-; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11248; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11248.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Unemployment -- Mathematical models.
Description: "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"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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