University of Minnesota
Economic Growth and Development



Class 1

Figures 1,2,3,4

Problem set 1  

Class 2

We discussed some data on wage inequality and income inequality. We looked at wage inequality trends from Autor, Katz and Kearney. We discussed how to decompose wage inequality in a component explained by a given factor (i.e. education) and residual. We looked at some trends in the top income shares analyzed by Piketty and Saez

Class 3

Discuss problem set 1. Discuss wealth inequality data from Diaz-Jimenez at al. and Cagetti De Nardi. Discuss facts on consumption inequality: Krueger and Perri

Class 4

Decomposing the increase in income inequality in permanent v/s transitory. Three methods: purely statistical, using observables, from consumption data. Katz and Autor HLE (2.4, 2.5 and 2.6). Inequality over the life cycle Deaton and Paxson, Attanasio and Davis, Heathcote, Storesletten and Violante

Class 5

Aiyagari Hugget model of consumption-saving

Classes 6-7

How to compute the Aiyagari-Hugget model.
Approximating a AR process with a Markov Chain: Method of moments. Tauchen procedure.

Solving for decision rules: Policy function iteration, value function derivative iteration, policy function iteration and endogenous grid (see Barillas and Villaverde)

Solving for stationary equilibria

Problem set 2

Classes 8-10

Endogenizing the income process: Adding leisure. Read Heathcote, Storesletten and Violante:  Insurance and Opportunities: The Welfare Implications of Rising Wage Dispersion

Class 11

Adding human capital accumulation. Hugget, Yaron and Ventura: Sources of Life-Cycle Inequality

Problem set 3



Oct 26. First class will meet in Heller 969 at 9.15

Nov. 2. New classroom and meeting time: Tuesday and Thursday 12.30-2.00 Heller 1275. No class on November 9

Nov 7.  New Classroom Heller 969, same meeting time. There will be only one class in which we will go back to 1275.

Nov. 28. No Class on Nov 30

Dec. 6. Next class, December 7 we'll meet in room 1275. All remaining classes, including the extra class, will be in 969. We will have an extra class on Monday December 11, from 5.15-7.00 pm.

Jan 10. Problem set 3 is now on line. The final requirement for the class is either problem set 3, or the research project described in the syllabus (extra points if you do both!). The deadline for handing those in is January 29. I will submit grades shortly after.