Describing the Dynamics of Distributions in Search and Matching Models by Fokker-Planck Equations

Christian Bayer () and Klaus Waelde ()
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Christian Bayer: Department of Mathematics, University of Vienna, Austria
Klaus Waelde: Department of Economics, Johannes Gutenberg-Universitaet Mainz, Germany
Authors registered in the RePEc Author Service: Klaus Wälde

No 1110, Working Papers from Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz

Abstract: The analysis of distributions is central to search and matching models. Wage distributions are a central concern but distributions of productivities, fi?rm types, human capital, entitlement to unemployment benefi?ts and wealth become increasingly important. We present a method - the Fokker-Planck equations - which allows to describe and analyse the dynamics of distributions in a very general way. We illustrate this approach by analysing optimal saving of risk-averse households in a frictional labour market. Our Fokker-Planck equations describe the evolution of the joint distribution of labour market status and wealth. A very intuitive interpretation is provided.

Keywords: frictional labour markets; optimal saving; incomplete markets; Poisson uncertainty; Fokker-Planck equations; general equilibrium (search for similar items in EconPapers)
JEL-codes: D91 E24 J63 J64 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2011-07-21, Revised 2011-07-21
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:jgu:wpaper:1110

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