Quadrature-Based Methods for Solving Heterogeneous Agent Models with Discontinuous Distributions
AbstractThe paper develops a method for solving heterogeneous agent models in which the distribution of characteristics across agents is a state variable and the distribution can be discontinuous at points that vary endogenously. The method extends the approach of [Tauchen, George and Robert Hussey, Econometrica 59, 1991, 371–396] for solving nonlinear rational expectations models using a discrete-state Markov chain approximation to a continuous Markov process. The paper presents an example application of a general equilibrium labor search model with persistence in the idiosyncratic productivity of heterogeneous firms. Copyright Springer Science + Business Media, Inc. 2005
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Bibliographic InfoArticle provided by Society for Computational Economics in its journal Computational Economics.
Volume (Year): 26 (2005)
Issue (Month): 1 (August)
Markov chain; numerical integration; truncated distribution; numerical solution technique; labor search;
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