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Solving heterogeneous-agent models with paramaterized cross-sectional distribution

Author

Listed:
  • Yann Algan

    (PJSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, OEP - Organisation et Efficacité de Production - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12)

  • Olivier Allais

    (CORELA - Laboratoire de Recherche sur la Consommation - INRA - Institut National de la Recherche Agronomique)

  • Wouter J. den Haan

    (UvA - University of Amsterdam [Amsterdam] = Universiteit van Amsterdam)

Abstract

A new algorithm is developed to solve models with heterogeneous agents and aggregate uncertainty. Projection methods are the main building blocks of the algorithm and - in contrast to the most popular solution procedure - simulations only play a very minor role. The paper also develops a new simulation procedure that not only avoids cross-sectional sampling variation but is 10 (66) times faster than simulating an economy with 10,000 (100,000) agents. Because it avoids cross-sectional sampling variation, it can generate an accurate representation of the whole cross-sectional distribution. Finally, the paper outlines a set of accuracy tests.

Suggested Citation

  • Yann Algan & Olivier Allais & Wouter J. den Haan, 2008. "Solving heterogeneous-agent models with paramaterized cross-sectional distribution," PSE-Ecole d'économie de Paris (Postprint) halshs-00754295, HAL.
    • Handle: RePEc:hal:pseptp:halshs-00754295
    DOI: 10.1016/j.jedc.2007.03.007
    Note: View the original document on HAL open archive server: https://pjse.hal.science/halshs-00754295v1
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    References listed on IDEAS

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    More about this item

    Keywords

    Incomplete markets; Numerical solutions; Projection methods; Simulations;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets

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