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Staying When the Going Gets Tough: The Equivalent Predictions of Option and Search Theory on Migration during Economic Downturns

6 Pages Posted: 10 May 2017 Last revised: 25 May 2017

John Gardner

University of Mississippi - Department of Economics

Joshua R. Hendrickson

University of Mississippi; American Institute for Economic Research

Date Written: May 8, 2017

Abstract

We show that both option and search theory suggest that workers should be less likely to migrate out of labor markets in which there is greater uncertainty about future economic opportunities. The intuition for this result is that, the more volatile the labor market, the greater the likelihood of such opportunities improving in the future. This result weakens the standard prediction that workers workers should migrate out of markets experiencing relative economic downturns.

Keywords: migration, local labor markets, option theory, search models

JEL Classification: R23, J61, J64

Suggested Citation

Gardner, John and Hendrickson, Joshua R., Staying When the Going Gets Tough: The Equivalent Predictions of Option and Search Theory on Migration during Economic Downturns (May 8, 2017). Available at SSRN: https://ssrn.com/abstract=2965270

John Gardner

University of Mississippi - Department of Economics ( email )

371 Holman Hall
University, MS 38677
United States

Joshua Hendrickson (Contact Author)

University of Mississippi ( email )

Oxford, MS 38677
United States

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

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