There is a substantial amount of microeconomic evidence documenting diferential responses oflabor supply across productivity groups. In partic-ular, more productive individuals: (i) enjoy ahigher employment rate, (ii) have a lower volatility of employment and (iii) spend less time workingat...

This paper presents an algorithm for solving nonlinear dynamic stochastic models that computes value function by simulations. We argue that the proposed algorithm can be a useful alternative to the existing methods in some applications.

This paper studies a complete-market version of the neoclassical growth model, where agents face idiosyncratic shocks to earnings. We show that if agents possess identical preferences of either the CRRA or the addilog type, then the heterogeneous-agent economy behaves as if there was a...

Euler-equation methods for solving nonlinear dynamic models involve parameterizing some policy functions. We argue that in the typical macroeconomic model with valuable leisure, labor function is particularly convenient for parameterizing. This is because under the labor-function...

Parametrized Expectation Algorithm (PEA) is a powerful tool for solving nonlinear stochastic dynamic models. However, it has an important shortcoming: it is not a contraction mapping technique and thus, does not guarantee finding the solution. We suggest a simple modification that enhances the...

Does a heterogeneous agents version of a neoclassical model with labor-leisure choice replicatethe distributions of consumption and working hours observed in the cross-sectional data? Doesincorporating heterogeneity enhance the aggregate performance of the representative agentmodel? We address...

This paper modifies the standard one-sector growth model with uninsurable idiosyncratic risk and liquidity constraints to include multiple types of quasi-geometric consumers. For a calibrated version of the model, we show that a modest difference between the quasi-geometric discounting...

This paper studies the properties of the solution to the heterogeneous agents model in Den Haan, Judd and Juillard (2008). To solve for the individual policy rules, we use an Euler-equation method iterating on a grid of prespecified points. To compute the aggregate law of motion, we use the...

This paper examines the empirical relevance of an intertemporal model of consumption with dynamically inconsistent decision makers. The model has testable implications concerning the relation between the consumers' degrees of short-run patience (self-control) and their consumption-saving...

We study the determinants of Downward Nominal Wage Rigidity(DNWR) in the context of a new-Keynesian heterogeneous-agent model. Laborproductivity of agents is subject to perfectly insurable idiosyncratic shocks.Wage contracts are signed one period ahead and specify the minimum wagethat the firm...