Graduate teaching, Fall 2020
by Mariacristina De Nardi
Heterogenous Agent Models (HAM): Crafting, Calibration, and Estimation
HAM is a second-year graduate class on quantitative heterogeneous agents models. Its goal is to bring class participants to the frontier of research in this field and help generate ideas for research projects.
The course will start with a basic life cycle model of consumption and savings and will then turn to models in which agents face a richer set of risks and make more decisions.
These applications focus on savings and consumption, investment in health and human capital, and on couples and singles. Other topics that will be covered include wealth inequality, entrepreneurship, and more generally how risks and saving motives lead to wealth inequality.
Along the way, we will discuss how to take these model to data and calibration versus estimation methods, including the method of simulated moments. We also will critically evaluate the successes of these models, their shortcomings, and their policy implications.
Class plan and slides (to be added as they are ready)
1. A basic estimated life-cycle model of consumption and savings with income uncertainty and precautionary savings + how to structure a good abstract and introduction. Gourinchas and Parker, Econometrica 2002 + Cagetti, Journal of Business and Economic Statistics 2003 + Cagetti, American Economic Review Papers and Proceedings 2001. Slides
2. A richer estimated life-cycle model of consumption, savings, labor supply, and retirement with wage and health uncertainty. French, Review of Economic Studies 2005. Slides
3. A close up of the retirement period. Why do high-income elderly keep saving so much during retirement? How important are medical expenses in driving saving behavior over the life cycle? What is the role and value of Medicaid? De Nardi, French, and Jones, Journal of Political Economy 2010 + De Nardi, French, and Jones, American Economic Review Papers and Proceedings 2009 + De Nardi, French, and Jones, American Economic Review 2016. Slides
4. How costly is bad health and how good is good health? A much richer life-cycle model of savings, labor supply, and retirement with income, health risk, and health costs: structural estimation with the Method of Simulated Moments and what we learn from it. De Nardi, Pashchenko, and Porapakkarm, “The lifetime costs of bad heath,” NBER working paper Working Paper No. 23963, 2017. Slides
5. How costly is bad health over the life cycle and how do these costs depend on publicly-provided disability insurance? Hosseini, Kopecky, and Zhao, “How Important Is Health Inequality for Lifetime Earnings Inequality?” 2020 working paper. Slides
6. A model with supply and demand of health insurance. Braun, Kopecky, and Koreshkova, “Old, frail, and uninsured: Accounting for features of the U.S. long-term care insurance market,” Econometrica, 2019.
7. A life cycle model with endogenous health formation and preventative and curative investment. Serdar Ozkan, “Preventive vs. Curative Medicine: A Macroeconomic Analysis of Health Care over the Life Cycle,” Working paper, 2017.
8. How insured are households against income fluctuations and how do they affect consumption inequality? A semi-structural estimation approach. Blundell, Pistaferri, and Preston, “Consumption inequality and partial insurance,” American Economic Review 2008.
9. Why does consumption fluctuate in old age and what is the role of health and income shocks? How well are old households insured against shocks? Blundell, Borella, Commault, and De Nardi “Why does consumption fluctuate in old age and how should the government insure it?” NBER working paper No. 27348, 2020.
10. On the importance of being serious about the data. Hryshko and Manovskii, “Income dynamics and consumption insurance,” Working paper, 2018.
11. How rich are earnings and consumption dynamics? Arellano, Blundell, and Bonhomme, “Earnings and consumption dynamics: a nonlinear panel data framework,” Econometrica 2017.
12. Why does it matter that earnings dynamics are much richer than typically assumed in macro models with heterogeneous agents? De Nardi, Fella, and Paz-Pardo, “Nonlinear household earnings dynamics, consumption, and welfare,” Journal of the European Economic Association 2020.