Dear All,

I try to incorporate the informal sector into the OLG two periods model with human capital. The model could not solve analytically, so I used the fsolve to solve for k, h, and tau (tax). Then, I use these solutions as the initial value for the model. The model turned out that couldn’t calculate the steady state. Also, it showed the results like this but only gave one value of the steady state.

Blockquote

There are 1 eigenvalue(s) larger than 1 in modulus

for 0 forward-looking variable(s)

The rank condition ISN’T verified!

Perfect foresight solution found.

Blockquote

I also check the residual of the equations, which are not equal to zero. but I couldn’t figure out what was wrong with the model. I attached the mod. file here.

test310722.mod (7.4 KB)

Thank you very much in advance for your help.

Best,

Navarat