Investment under Risk with Discrete and Continuous Assets
This paper considers a general class of stochastic dynamic choice models with discrete and continuous decision variables. This class contains a variety of models that are useful for modeling intertemporal household decisions under risk. Our examples are drawn from the field of development economics. We formalize this class as a dynamic programming problem, then propose a solution method that relies on value function iteration. Finally, in an example we show how our algorithm can be applied to solve and estimate a dynamic model with discrete and continuous controls.
|Date of creation:||16 Jun 2009|
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- Rosenzweig, Mark R & Wolpin, Kenneth I, 1993.
"Credit Market Constraints, Consumption Smoothing, and the Accumulation of Durable Production Assets in Low-Income Countries: Investment in Bullocks in India,"
Journal of Political Economy,
University of Chicago Press, vol. 101(2), pages 223-244, April.
- Rosenzweig, Mark R. & Wolpin, Kenneth I., 1989. "Credit Market Constraints, Consumption Smoothing and the Accumulation of Durable Production Assets in Low-Income Countries: Investments in Bullocks in India," Bulletins 7487, University of Minnesota, Economic Development Center.
- Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, December.
- Dercon, Stefan, 1998. "Wealth, risk and activity choice: cattle in Western Tanzania," Journal of Development Economics, Elsevier, vol. 55(1), pages 1-42, February.
- Stefan Dercon, 1996. "Wealth, risk and activity choices: cattle in Western Tanzania," CSAE Working Paper Series 1996-08, Centre for the Study of African Economies, University of Oxford.
- Goffe, William L. & Ferrier, Gary D. & Rogers, John, 1994. "Global optimization of statistical functions with simulated annealing," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 65-99.
- Fafchamps, Marcel & Pender, John, 1997. "Precautionary Saving, Credit Constraints, and Irreversible Investment: Theory and Evidence from Semiarid India," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(2), pages 180-194, April.
- Zimmerman, Frederick J. & Carter, Michael R., 2003. "Asset smoothing, consumption smoothing and the reproduction of inequality under risk and subsistence constraints," Journal of Development Economics, Elsevier, vol. 71(2), pages 233-260, August.
- Frederic Zimmerman & MICHAEL R. CARTER, "undated". "Asset Smoothing, Consumption Smoothing and the Reproduction for Inequality under Risk and Subsistence Constraints," Wisconsin-Madison Agricultural and Applied Economics Staff Papers 402, Wisconsin-Madison Agricultural and Applied Economics Department.
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