Search Models: Introduction to Theory and Quantitative Methods
Introduction
It is very hard to explain unemployment using classical economic models since standard supply and demand frameworks predict wage adjustments such that total labor supply equates total labor demand. Ubiquitous, persistent unemployment suggests that frictions in the labor market should be included in any rigorous model. In this course we review search models that can explain simultaneous unemployed workers and vacant jobs in the economy. These models are also useful in explaining some facts in markets that use money to make any trade.
Moreover, we review methods to empirically simulate and estimate parameters of such models. This is a research-based course and is designed for PhD students or advanced master students and is taught jointly by Hosein Joshaghani and Seyed Mohammad Reza Davoodalhosseini.
Slides
Lecture 1: Dynamic Optimization
Lecture 2:
Lecture 3:
Lecture 4:
Lecture 5: Discrete-Time Search Models
Lecture 6: Continuous-Time Search Models
French and Taber (2011) HLE, Identification of models of the labor market
Problem Sets
Problem set 1: Sufficiency of EE and TC and the “principle of optimality“, due on Oct 6th
Problem set 2: The Bellman operator satisfies the Blackwell’s sufficient conditions, due on Oct 13th
Problem set 3: Mc-Call Search Model: Theory, due on Oct 20th
Problem set 4: Mc-Call Search Model: Quantitative Analysis. For the quantitative part of this homework, Sargent’s quantecon.org is the required reading, either Python or Julia, due on Oct 27th.
Problem set 5: Continious Search Model and many applications such as Brudett and Mortensen (1980), Hey (1979) and Fallick (1993).
Problem set 6: McCall search model: Comparative statics and extension with history dependent offers, due on Nov 12th.
Problem set 7: DMP model: Nash bargaining, due on Nov 16th.