Job search with an external opportunity: an experimental exploration of the Todaro Paradox

In this paper we present an experiment designed to test whether results consistent with the predictions of the Harris–Todaro model of migration can be reproduced in an experimental setting. Data issues in the developing world and with migration data in general limit empirical testing of the model. In such a data environment, laboratory experiments can add insight to the theory. We introduce an external opportunity to a traditional labor market search experiment to see whether it extends search and unemployment in a primary market. Our results generally support the predictions of the model: an external opportunity increases search unemployment in a primary labor market. This research has been supported by the University of Alaska. An earlier draft of this paper was delivered at the experimental economics workshop, Resources, Institutions, and the Owner State, held at the University of Alaska Anchorage, August 2006. The authors are grateful for the comments received at this workshop.