John J. McCall

A Sequential Study of Migration and Job Search

This paper designs a multiarmed bandit (MAB) sequential model for the analysis of the migration-job search process. The implications either are compatible with well-known migration behavior or, when novel, are also plausible. For example, regions with large wage variability attract migrants, and regions with large nonpecuniary returns increase both in migration and out migration. A major advantage of this approach is the relative ease with which martingale estimators can be derived from the martingale structure of the model. These martingale methods are exemplified for the return migration phenomenon.

The Economics of Search

1. Introduction 2. Mathematical Methods 3. The History and Evolution of Sequential Analysis 4. The Basic Sequential Search Model and its Ramifications 5. Estimation Methods for Duration Models 6. Unemployment, Unemployment Insurance and Sequential Job Search 7. Job Search in a Dynamic Economy 8. Expected Utility Maximizing Job Search 9. Multi-armed Bandits and their Economic Applications 10. A Sample of Early Response to Diamonds Paradox and Rothschilds Complaint 11. Equilibrium Search after the Diamond-Mortensen-Pissarides Breakthrough 12. Structural Estimation Methods 13. The Ubiquity of Search 14. Topics for Further Inquiry

Estimation in sequential decisionmaking models : A methodological note

Abstract The purpose of this note is to develop an appropriate model of behavior and a statistical technique for estimating it for individuals who make sequential decisions under uncertainty. The distinctive aspect of this model is that differences among individuals are reflected in their behavior rather than being swept into the error term.

Systematic Search, Belated Information, and the Gittins' Index

Abstract This paper uses multi-armed bandit methods to characterize the optimal solution of a rather complicated search problem. The job search is conducted systematically and there is belated information, that is, some aspect of the job is discerned only after the job has been tested for one period.

Exchangeability and its economic applications

Abstract The symmetry possessed by exchangeability is the key to its usefulness. The methods that are used to comprehend reality will edify insofar as they reflect this symmetry. This is true of theoretical models, empirical methods, and algorithms. Indeed, if the design of mechanisms is by rearrangement of natural matter, their survival value will depend on the degree to which they retain the symmetry of the original matter. This comment encompasses complex machinery and sophisticated political, social, and economic institutions. The paper simply embroiders this observation.

Progressive taxation in sequential decisionmaking: Deterministic and stochastic analysis

Abstract This paper investigates the effect of progressive taxation on sequential decisionmaking. The decision is the archetypical problem of capital theory: determining the optimal cutting time for a tree that grows according to either a deterministic or stochastic process. For the deterministic model, the optimal cutting time is unaffected by proportional taxes, but decreases as taxes become more progressive. For the stochastic model, the major finding is that uncertainty can partially offset the inefficiency induced by progressive taxation; when this result holds the government benefits from increased uncertainty whereas the taxpayer is harmed. One noteworthy example of this is when the trees growth is governed by Brownian motion.

An equilibrium model of turnover with belated information

Abstract This paper treats matching and sequential job search when there is belated information on both sides of the market. The belated information gives rise to quits and firings. The main result is contained in Theorem 1 where Marshallian equilibrium quit and firing probabilities are derived. With these probabilities equilibrium unemployment rates are then calculated. Both the offer distribution and the productivity distribution are exogenous.

Taxation, incentives, and risk sharing

The tendency for taxation to weaken incentives and induce inefficient behavior on the part of entrepreneurs is demonstrated with a simple example. Next the Mossin model is extended from a proportional to a progressive tax structure that closely approximates the one in place in the U.S.A. It is shown that increased progressivity causes the amount of wealth invested in the risky asset to decline rather than increase as is true with proportional taxes.

Accrual capital gains taxation and the lock-in effect

The recent literature on capital gains taxation suggests that assets are sold sooner when taxes are assessed and paid continuously rather than at the time of sale. Our analysis tends to support this view, for this suggestion is valid if the asset value function is convex or if it is concave and there is full or partial-loss-offset.