Two Firms in A Model

Dear Everyone:

We have two country models, could we have a model with two firms with different producion function?

I tried, but there are problems of “empty state space model”:

var y_h y_f c_h c_f k_h k_f i_h i_f l_h l_f w r z_h z_f;
varexo e_h e_f;
parameters beta psi delta alpha_h alpha_f rho_h rho_f;

alpha_h = 0.33;
alpha_f = 0.53;
beta = 0.99;
delta = 0.023;
psi = 1.75;
rho_h = 0.95;
rho_f = 0.98;

model;
1/c_h = beta*(1/c_h(+1))(1+r(+1)-delta);
1/c_f = beta
(1/c_h(+1))(1+r(+1)-delta);
psi
c_h/(1-l_h) = w;
psic_f/(1-l_f) = w;
c_h+ k_h-(1-delta)k_h(-1)= y_h;
c_f+ k_f-(1-delta)k_f(-1) = y_f;
y_h = (k_h(-1)^alpha_h)
(exp(z_h)l_h)^(1-alpha_h); // h: production
y_f = (k_f(-1)^alpha_f)
(exp(z_f)l_f)^(1-alpha_f); // f: production
w=y_h
(1-alpha_h)/l_h; // h. wage, perfect competition
r=y_h
alpha_h/(k_h(-1));
w=y_f
(1-alpha_f)/l_f; // f.wage, perfect competition
r=y_f*alpha_f/(k_f(-1));
//i_h = k_h-(1-delta)k_h(-1);
//i_f = k_f-(1-delta)k_f(-1);
//y=y_h+y_f;
//l=l_h+l_f;
//k=k_h+k_f;
//i =i_h+i_f;
z_h = rho_h
z_h(-1)+e_h;
z_f = rho_f
z_f(-1)+e_f;

end;

initval;
k_h = 8;
k_f = 8;
//k = 16;
c_h = 0.76;
c_f = 0.76;
l_h = 0.3;
l_f = 0.3;
//l = 0.6;
w = 2.07;
r = 0.03;
z_h = 0;
z_f = 0;
e_h = 0;
e_f = 0;
end;

steady;
check;
shocks;
var e_h = 0.1;
end;

stoch_simul(irf=40,periods=2100);

Your help is highly appreciated!

Best,

Yi

My Dynare version warns that it cannot find the steady state. The reason is that your starting values are really poor. Put

before steady to see this.

Dear Jpfeifer,

Thank you very much for the help!

I guess the two wage and rent collide with each other, so"Empty state-space model" appears.

Is there anyway to build a heterogeneous firm model in Daynar using this simple way, not with the distribution of firms?

Thanks again!

Best,

Yi