ABSTRACT
The well known fact that ‘distance acts as a serious deterrent to migration - perhaps even the single most important deterrent -’has often been seen as the result of information effect. In neoclassical microeconomic theory the labour market is the place where the supply of and demand for labour meet. They result from the optimising behaviour of firms and potential workers. By maximising their profit function firms derive their labour demand curve, which adds up to the demand curve of the labour market. One of the most important limitations of the standard search model is its treatment of labour demand. In the model employers simply generate wage offers and have no real intention of filling vacancies. In reality they are searching for workers just in the same way as workers are searching for jobs. Their search costs are costs of interviews, newspaper advertisement, and losses in production.
