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How to set up the Hamiltonian for this utility maximization problem?

Consider a representative household who accumulates capitals, earns labour and capital incomes, consumes part of its incomes, buys bonds and pays taxes. The household maximizes its lifetime utility $$ \max_{c_t, l_t, k_t, b_t} \int_0^\infty e^{-\rho…
user141240
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Are there any general rules that can be used to assess the consequences of a significant minimum wage increase in a country's economy?

Quite recently the EU Parliament discussed upon a new draft EU law that will ensure a minimum level of wage protection in all member states. The minimum relative to average wages of full-time workers table indicates that there is quite a big…
Alexei
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Dealing with Missing Data when Testing the CAPM

Question How should I deal with missing data when trying to test the CAPM? Specifically, there are some stocks that are newly listed and/or delisted at any time. I don't want to exclude assets for which I don't have complete data because this would…
jmbejara
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Under The Gold Standard, was a country's money supply literally restricted by physical gold stores?

Under The Gold Standard, did the United States Mint actually track the amount of paper money in circulation against gold stores? And if there was an amount of paper money equal to the gold stores, did they stop printing paper money? And what if…
Deane
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What is the intuition behind Expected Utility Theorem?

I am referring to the definition in Proposition 6.B.3 on Page 176 of Mas Colell. I follow the formal proof and the application of the Independence axiom at various steps (mathematical application of the definition), but I am having a hard time…
Rumi
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How many utility functions can a person have?

Classical choice theory assumes that each person has a utility function, and chooses from each set of options an option that maximizes this utility. There are many empirical studies that refute this theory, showing that human choice cannot be…
Erel Segal-Halevi
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Lasso Double Selection Stata Commands

The Belloni et al. 2014 paper develops the theory of Lasso in post-double selection. There are two commands that appear to me to perform this function: $dsregress$ and $pdslasso$. The $dsregress$ command is just "double-selection" while $pdslasso$…
Michael Gmeiner
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Positive externalities of cars - free seats on public transport

I was in a discussion about externalities surrounding private and public transport. Someone argued that by taking a car they are creating a positive externality by not taking up a seat on a bus or train. My gut reaction is no that's wrong. But that…
Studi
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The Equilibrium Wage in Ricardian Trade Model

I am learning the Ricardian trade model by reading Eaton & Kortum 2012 JEP. The equilibrium is easy to understand when there are finite goods, as shown in their Figure 1. However, they then introduce the Dornbusch, Fischer, Samuelson (1977) model…
Alalalalaki
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What would happen if we eliminated fractional reserve banking while expanding the money supply?

In a fractional reserve banking system, banks can lend out more money than they hold in cash. For example, with a 10% reserve requirement, they can lend out 9 times as much money as they hold in reserves. One downside of fractional reserve banking…
afreelunch
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Overview: Crises and their causes

There have been many business cycles in the US over the past 50 years (although less so since the great moderation). Many of us youngsters are too young to remember many of these. Is there some summary article / plot containing these, including…
FooBar
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Conditional probability in Kaplan, Menzio (2014)

This is question about Kaplan and Menzio's shopping time model. Pages 7,8: Unemployed search once or twice (for a seller). $\psi_u$:probability of searching twice, searching once with prob $1-\psi_u$ $\nu$ is the probability of finding a seller.…
FooBar
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What does trade deficit really mean?

I watched a video about how if America imports USD 1m worth of goods but only exports USD 600k worth of goods, there is a USD 400k debt to other countries if the other country allows this deficit. US importers pay for the value of the goods they…
QuestionMan
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Variance Decomposition of Wage Equation

I am reading two recent papers studying between-firm and within-firm wage inequality, Barth et al 2016 (hereafter BBDF) and Song et al 2019 (hereafter SPGBV). I am confused by the different variance decomposition methods used in these two…
Alalalalaki
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Is climate change an economic question?

The assumption that the Keeling Curve can be approximated with a function $$k=A+B\cdot e^{\alpha t}$$ leads to a solution with $A=258.6$, $B=4,243\cdot 10^{-13}$ and $\alpha=0.0166$ with a high correlation with measured data. The time parameter is…
Lehs
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