We solve and estimate a dynamic model that allows agents to optimally choose their labor hours and consumption and that allows for both human capital accumulation and savings. Estimation results and simulation exercises indicate that the intertemporal elasticity of substitution is much higher...

A particularly challenging use of decision-theoretic models in economics is to forecast the impact of large changes in the environment. The problem we explore in this article is how to gain confidence in a model's ability to predict the impact of such large changes. We show that an approach to...

This article develops a simulation estimation algorithm that is particularly useful for estimating dynamic panel data models with unobserved endogenous state variables. Repeated sampling experiments on dynamic probit models with serially correlated errors indicate the estimator has good small...

Using data from the NLSY79, we structurally estimate a dynamic model of the life cycle decisions of young women. The women make sequential joint decisions about school attendance, work, marriage, fertility, and welfare participation. We use the model to perform counterfactual simulations...

I describe a strategy for structural estimation that uses simulated maximum likelihood (SML) to estimate the structural parameters appearing in a model's first-order conditions (FOCs). Generalized method of moments (GMM) is often the preferred method for estimation of FOCs, as it avoids...

We examine whether the Mortensen-Pissarides matching model can account for the business-cycle facts on employment, job creation, and job destruction. A novel feature of our analysis is its emphasis on the reduced-form implications of the matching model. Our main finding is that the model can...

This paper extends the theory of recursive competitive equilibrium developed by Mehra and Prescott (1980) to a class of multisector economies in which mobility is costly. By introducing l otteries into the consumption sets of individuals, it is shown that e quilibrium allocations can be obtained...

The large differences in hours of work across rich countries reflect large differences in both employment to population ratios and hours per worker. We imbed the canonical model of labor supply into a matching model to produce a model with operative intensive and extensive margins, and assess...

The authors examine the effect of community zoning regulations on allocations and welfare in a two-community model. Individuals choose in which community to live and each community levies a tax, chosen via majority vote, on local property to finance local public education. The authors study both...