Two models of an employee's search for work, using some results from the theory of optimal stopping rules. Included are an optimal search policy for a simple model of the search process, a more general model of unemployment (which considers the anticipated period of employment as well as the wage rate as factors in the decisionmaking process), and an adaptive search policy (which results from revisions in the searcher's imperfect knowledge of his wage rate distribution). The distinction between hardcore and fractional unemployment and the effects of various policies to reduce unemployment are interpreted within the framework of the simple model. It is shown that a minimum wage law has no effect on the fractionally unemployed.
This report is part of the RAND Corporation Research memorandum series. The Research Memorandum was a product of the RAND Corporation from 1948 to 1973 that represented working papers meant to report current results of RAND research to appropriate audiences.
Our mission to help improve policy and decisionmaking through research and analysis is enabled through our core values of quality and objectivity and our unwavering commitment to the highest level of integrity and ethical behavior. To help ensure our research and analysis are rigorous, objective, and nonpartisan, we subject our research publications to a robust and exacting quality-assurance process; avoid both the appearance and reality of financial and other conflicts of interest through staff training, project screening, and a policy of mandatory disclosure; and pursue transparency in our research engagements through our commitment to the open publication of our research findings and recommendations, disclosure of the source of funding of published research, and policies to ensure intellectual independence. For more information, visit www.rand.org/about/research-integrity.
The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.