When job prospects are uncertain, labor market size matters even when labor and jobs, respectively, are homogenous. The expected time to employment and its standard deviation may differ systematically with labor market size and create incentives for agglomeration.

Although we generally teach economics as if markets formed a perfect system, in reality, there are many instances of partial and complete market failure in the real economy. Imperfections complicate models and analyses. Therefore, it is better to first introduce students to the model of the...