Can't find the steady-state

Steady state
1

Hi,

I took the traditional deterministic neoclassical growth model and extended it by adding a female agent in the household. Both agents supply hours individually but consume and save jointly. Besides, I added “on-the-job” human capital accumulation for each type of agent (male and female), i.e., the human capital law of movement is a function of hours worked. All functional forms are standard.

I can’t solve for the steady-state analytically. Dynare can’t solve it numerically.

Does anyone have an insight about why Dynare is not able to find the steady-state in this setup?

Many thanks!

simulation_v2_3.mod (4.8 KB)

2

I changed the human capital depreciation value and some initial values and now I get the following message:

Error using print_info (line 32)
One of the eigenvalues is close to 0/0 (the absolute value of numerator and denominator is
smaller than 0.0000!
If you believe that the model has a unique solution you can try to reduce the value of
qz_zero_threshold.

Error in check (line 48)
print_info(info, 0, options);

Error in simulation_v2_3.driver (line 259)
oo_.dr.eigval = check(M_,options_,oo_);

Error in dynare (line 293)
evalin(‘base’,[fname ‘.driver’]) ;

simulation_v2_3.mod (4.8 KB)

3

Are you sure your steady states make sense?

y  		 2.70432e+08
c  		 1.73467e+08
x  		 9.69654e+07
k  		 3.73844e+09
l  		 1.95626e+07
lm 		 318.819
lf 		 670.765
hm 		 31881.9
hf 		 67076.5
r  		 0.0361691
wm 		 6.91198
wf 		 4.70015

The differences in size may cause numerical issues.

4

Many thanks for your reply! The large numbers are probably because the stock of human capital gets large in the SS (hm and hf). Therefore, (y, c, x, k, l) get large.

I can update the human capital accumulation functions by multiplying hours by a constant to normalize human capital values. Let’s see if it works.