Economics of Information and Job Search.

by John McCall

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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.

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