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44
Dynamic Discrete Choice Structural Models: A Survey
, 2007
"... This paper reviews methods for the estimation of dynamic discrete choice structural models and discusses related econometric issues. We consider single agent models, competitive equilibrium models and dynamic games. The methods are illustrated with descriptions of empirical studies which have applie ..."
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Cited by 104 (4 self)
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This paper reviews methods for the estimation of dynamic discrete choice structural models and discusses related econometric issues. We consider single agent models, competitive equilibrium models and dynamic games. The methods are illustrated with descriptions of empirical studies which have applied these techniques to problems in different areas of economics. Programming codes for the estimation methods are available in a companion web page.
Fiscal Policy with Heterogeneous Agents and Incomplete Markets,” The Review of Economic Studies
"... I undertake a quantitative investigation into the short run effects of changes in the timing of taxes for model economies in which heterogeneous households face a borrowing constraint. A combination of the distortionary effects of nonlumpsum taxation and the liquidity effects arising from the asse ..."
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Cited by 69 (5 self)
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I undertake a quantitative investigation into the short run effects of changes in the timing of taxes for model economies in which heterogeneous households face a borrowing constraint. A combination of the distortionary effects of nonlumpsum taxation and the liquidity effects arising from the asset market structure are found to imply large real effects from tax changes. For example, a temporary proportional income tax increase in the benchmark model economy reduces aggregate consumption by around 29 cents for every additional dollar of tax revenue raised. The consumption of low wealth households who are close to the borrowing constraint is most sensitive to the current tax rate. While there are many such households, richer households account for a disproportionately large fraction of aggregate income and consumption. Thus the distortionary effects of proportional taxation are quantitatively more important at the aggregate level than the effects associated with incompleteness of asset markets.
An Estimable Dynamic General Equilibrium Model of Work, Schooling and Occupational Choice
, 2001
"... This paper develops and estimates a dynamic general equilibrium overlapping generations model of career decisions. The model is fit to data on life cycle employment, schooling and occupation decisions, and on life cycle labor earnings, within and between cohorts observed in the US between 1968 and 1 ..."
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Cited by 47 (2 self)
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This paper develops and estimates a dynamic general equilibrium overlapping generations model of career decisions. The model is fit to data on life cycle employment, schooling and occupation decisions, and on life cycle labor earnings, within and between cohorts observed in the US between 1968 and 1993. Based on the estimates of the model, the impact of cohort size on skill prices and, consequently, on career decisions is assessed. Compared to a baseline case in which cohort size increased at a steady (average) rate and the fertility process was stationary, it is found that the male baby bust generations born in the 1930s and 1940s faced higher skill prices (by as much as 2.0%), completed college at a higher rate (by as much as 0.3 percentage points) and worked more over the lifetime (by as much as 0.1 years). In contrast, the males from the baby boom generationsborninthe1950sand1960sfacedlowerskillprices(byasmuchas1.5%),completed college at a lower rate (by as much as 1.0 percentage points) and worked less over the lifetime (by as much as 0.1 years). The impact of cohort size is found to differ across gender due to the differential impact of fertility on the value of home production: unlike males, the female baby
Quantitative macroeconomic models with heterogeneous agents
 in Advances in Economics and Econometrics: Theory and Applications, Ninth World Congress of the Econometric Society
, 2006
"... ∗We would like to thank Torsten Persson for valuable comments, Rafael Lopes de Melo for ..."
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Cited by 23 (1 self)
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∗We would like to thank Torsten Persson for valuable comments, Rafael Lopes de Melo for
Earnings and wealth inequality and income taxation: Quantifying the tradeoffs of switching the U.S. to a proportional income tax system. Mimeo
, 1998
"... In this paper we develop a quantitative theory of earnings and wealth inequality that accounts for the U.S. earnings and wealth distributions almost exactly, and we use this theory to measure the steadystate tradeoffs that arise when switching from the current progressive income tax system, to a t ..."
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Cited by 21 (0 self)
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In this paper we develop a quantitative theory of earnings and wealth inequality that accounts for the U.S. earnings and wealth distributions almost exactly, and we use this theory to measure the steadystate tradeoffs that arise when switching from the current progressive income tax system, to a tax system in which income is proportionally taxed. Our theory is based on households that face an uninsurable idiosyncratic process on wages, that go through the life cycle stages of retirement and death, and that have altruistic feelings towards their progenie. Moreover, unlike some of the recent research on wealth inequality, the households in our model economies are equally patient. The main steadystate tradeoffs implied by our policy experiment are the following: on the one hand we find that output, wealth and, to a very small extent, the labor input are higher in the model economy with proportional income taxes (4.4, 11.4 and 0.9 % higher, respectively). On the other hand we find that in this model economy the distributions of wealth and consumption are significantly more unequal (their Gini indices increase by 10.4 and 13.0%, respectively). Finally, we find that the inequality of earnings and the earnings and wealth mobility of households remain almost unchanged.
Accuracy of simulations for stochastic dynamic models
 Econometrica
, 2005
"... This paper is concerned with accuracy properties of simulations of approximate solutions for stochastic dynamic models. Our analysis rests upon a continuity property of invariant distributions and a generalized law of large numbers. We then show that the statistics generated by any sufficiently good ..."
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Cited by 20 (4 self)
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This paper is concerned with accuracy properties of simulations of approximate solutions for stochastic dynamic models. Our analysis rests upon a continuity property of invariant distributions and a generalized law of large numbers. We then show that the statistics generated by any sufficiently good numerical approximation are arbitrarily close to the set of expected values of the model’s invariant distributions. Also, under a contractivity condition on the dynamics we establish error bounds. These results are of further interest for the comparative study of stationary solutions and the estimation of structural dynamic models.
Solving Finite Mixture Models: Efficient Computation in Economics under Serial and Parallel Execution
 Computational Economics
"... Abstract. Many economic models are completed by finding a parameter vector θ that optimizes a function f (θ), a task that can only be accomplished by iterating from a starting vector θ0. Use of a generic iterative optimizer to carry out this task can waste enormous amounts of computation when applie ..."
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Cited by 12 (2 self)
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Abstract. Many economic models are completed by finding a parameter vector θ that optimizes a function f (θ), a task that can only be accomplished by iterating from a starting vector θ0. Use of a generic iterative optimizer to carry out this task can waste enormous amounts of computation when applied to a class of problems defined here as finite mixture models. The finite mixture class is large and important in economics and eliminating wasted computations requires only limited changes to standard code. Further, the approach described here greatly increases gains from parallel execution and opens possibilities for rewriting objective functions to make further efficiency gains. Key words: heterogeneous agent models, numerical optimization JEL Classification: C61; C63; D58 1.
Solving the incomplete markets model with aggregate uncertainty using the KrusellSmith algorithm and nonstochastic simulations. Journal of Economic Dynamics and Control, this issue
, 2008
"... This article describes the approach to computing the version of the stochastic growth model with idiosyncratic and aggregate risk that relies on collapsing the aggregate state space down to a small number of moments used to forecast future prices. One innovation relative to most of the literature is ..."
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Cited by 7 (1 self)
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This article describes the approach to computing the version of the stochastic growth model with idiosyncratic and aggregate risk that relies on collapsing the aggregate state space down to a small number of moments used to forecast future prices. One innovation relative to most of the literature is the use of a nonstochastic simulation routine.
Solving heterogeneousagent models with parameterized crosssectional distributions
 J. Econ. Dynamics and Control
, 2008
"... A new algorithm is developed to solve models with heterogeneous agents and aggregate uncertainty that avoids some disadvantages of the prevailing algorithm that strongly relies on simulation techniques and is easier to implement than existing algorithms. A key aspect of the algorithm is a new proce ..."
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Cited by 6 (1 self)
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A new algorithm is developed to solve models with heterogeneous agents and aggregate uncertainty that avoids some disadvantages of the prevailing algorithm that strongly relies on simulation techniques and is easier to implement than existing algorithms. A key aspect of the algorithm is a new procedure that parameterizes the crosssectional distribution, which makes it possible to avoid Monte Carlo integration. The paper also develops a new simulation procedure that not only avoids crosssectional sampling variation but is also more than ten times faster than the standard procedure of simulating an economy with a large but finite number of agents. This procedure can help to improve the efficiency of the most popular algorithm in which simulation procedures play a key role.
FIXED COSTS AND LONGLIVED INVESTMENTS *
, 2008
"... Neoclassical investment models predict that firms should make frequent, small adjustments to their capital stocks. Microeconomic evidence, however, shows just the opposite – firms make infrequent, large adjustments to their capital stocks. In response, researchers have developed models with fixed co ..."
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Cited by 4 (0 self)
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Neoclassical investment models predict that firms should make frequent, small adjustments to their capital stocks. Microeconomic evidence, however, shows just the opposite – firms make infrequent, large adjustments to their capital stocks. In response, researchers have developed models with fixed costs of adjustment to explain the data. While these models generate the observed firmlevel investment behavior, it is not clear that the aggregate behavior of these models differs importantly from the aggregate behavior of neoclassical models. This is important since most of our existing understanding of investment is based on models without fixed costs. Moreover, models with fixed costs have nondegenerate, timevarying distributions of capital holdings across firms, making the models extremely difficult to analyze. This paper shows that, for sufficiently longlived capital, (1) the crosssectional distribution of capital holdings has virtually no bearing on the equilibrium and (2) the aggregate behavior of the fixedcost model is virtually identical to that of the neoclassical model. The findings are due to a near infinite elasticity of investment timing for longlived capital goods – a feature that fixedcost models and neoclassical models share. The analysis shows that the socalled “irrelevance results ” obtained in recent numerical studies of fixedcost models are not parametric special cases but instead reflect fundamental properties of longlived investments.