associated with the between-market move, which we will elaborate later on.

**Significance of job options.** There are multiple job options workers can compare from each labor market, and workers choose one job in every period. Which labor market a worker belongs to is not a direct choice, but rather an outcome of her choice of a job. If a worker chooses the job _j_ , then she belongs to the labor market _kj_ . This assumption is more realistic and introduces an important dimension through which aggregate shocks affect labor markets. The status of an economy impacts not only relative wages across markets but also the number of job options workers can choose from. The mass of tasks operated by producers responds to the shock, and the set of jobs expands (contracts) as the number of tasks increases (decreases). If the set of jobs expands, workers are able to sample more job options, and thus it becomes more likely to find a better job with a larger expected value. The sampled job options of our model are analogous to the vacancy concept in the search literature. When economic conditions improve, producers expand the task space by increasing _Tt_<sup>_k_.Then,the</sup> number of sampled job options increases, as workers are assumed to sample jobs at a constant rate. This relationship is determined at the general equilibrium which we will discuss after characterizing international trade. Our model brings the endogenous number of choices into an otherwise standard and easily tractable discrete choice model. Different from the search framework, the parameters of the model can be easily estimated using only labor market data, since the model provides simple equations that can be identified using only information on labor mobility.

Instead of choosing a job from job options available in each labor market, workers have an option to move to the residual labor market. Empirically, unemployment, home employment, and working in the informal sector all belong to this choice.<sup>20</sup> Each worker compares the option to move to the residual labor market with all the other job options available in each of formal labor markets.<sup>21</sup> We denote the choice to be in the residual labor market by _j_ = _I_ . The residual labor market is assumed to offer only one job option, and thus we do not distinguish a job from a labor market for the residual labor market, i.e., _kI_ = _I_ without loss of generality. We also assume that there is no job switching cost, _δ_ , if a worker decides to move into the residual labor market.<sup>22</sup>

**Timeline of events** . Each period _t_ consists of two stages in the following order: (1) production stage, and (2) preparation and mobility stage. In the production stage, workers start the period _t_ attached to a job _j_ , perform the task _τj_ associated with _j_ for production, and receive a market-level real wage _wt_<sup>_kj_.Next,thepreparationandmobilitystagebeginswithproducersdeterminingthemass</sup> of tasks _Tt_<sup>_k_and assigning tasks to positions for the next period.Workers then sample jobs for the next</sup> period and learn about the random iid costs shocks associated with each of them, the current job, and

> 20As explained in the previous section, the RAIS database covers only formal sectors. We introduce the residual market to account for the informal labor market that is not covered in the data that we will use to quantify the model.

> 21To be consistent with the way the residual market is empirically defined later, we will use the terms “formal” and “non-residual” interchangeably to denote the baseline labor markets.

> 22We could also assume that workers sample job options from the residual labor market and pay _δ_ with minor modifications. This alternative approach does not impact the general structure of the framework or the empirical strategy.

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