HETEROGENEITY AND MACROECONOMICS
DIW GC Masterclass (PhD course at the DIW)
Basic Information
  • Course dates: November 9-10, 2011
  • Place: DIW Berlin, Mohrenstrasse 58
  • Room: Eleanor-Dulles-Room (5.2.010)
  • Teacher: Jochen Mankart
  • Email: jochen.mankart@unisg.ch
  • Syllabus: here
Course Description
Economic agents differ in many respects: skill, employment status, consumption levels, wealth etc. This has important implications in many areas, e.g. optimal tax policy, welfare effects of business cycles, optimal unemployment insurance system. In this course, we will learn how to solve dynamic models in which agents differ (exogenously) in either their stochastic labor productivity or employment/unemployment status and insurance markets against these shocks are absent (incomplete financial markets). Agents can, however, self-insure against income shocks by saving or borrowing. We will derive equilibria of economies in which these heterogenous agents interact. In these equilibria, agents differ (endogenously) with respect to consumption and wealth. These models cannot be solved analytically. They have to be solved numerically. Since one learns these techniques best by applying them, we will have two practice sessions in which we solve these models on the computer.
Lectures notes and codes
Lecture 1a: Unemployment in an endowment economy
  • Value functions
  • Equilibrium definition
  • Calibration
  • Main paper: Huggett (1993)
Lecture 1b: Lecture 1a
  • Markov processes and invariant distributions
  • Discretization of state space (and controls)
  • Endogenous gridpoints method (Caroll 2006)
  • Steady state distribution and equilibrium computation
  • Accuracy
Lecture 2: Labor income risk in a production economy New features:
  • Firms' capital demand
  • Numerical: Discretizing AR(1) processes
  • Main paper: Aiyagari (1994)
Lecture 3: Labor income risk and aggregate fluctuations New features:
  • Forecasting the aggregate law of motion, i.e. factor prices
  • Simulating a model
  • Main paper: Krusell & Smith (1998) and Maliar, Maliar & Valli (2010)
Codes:
Office: 34-205 // jochen.mankart@unisg.ch// +41 (0)71 224 - 2155
Postal Address: FGN // Varnbüelstrasse 19 // 9000 St. Gallen // Switzerland