ECON 704 Midterm: pmacf17_704_Rios-Rull
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In the following there are 3 questions for 100 points. Be as brief as you can and good luck. 704 part ii: lucas trees with endowments and search. This is a representative agent economy where each agent owns shares of trees (of which there is measure one) that produces one banana per period. In addition, agents have an endowment of zt < 1 apricots which follow a markov chain with transition matrix . The agent has also one unit of time. Apricots are not traded and have to be picked up with one unit of bananas taken one unit of time. To purchase bananas, the agent have to search and nd banana trees with a matching function (t , h) that matches trees t , with total amount of household searching time h. the agent has preferences given by. Explain: skilled and unskilled workers in growth models.
