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Copy file name to clipboardExpand all lines: lectures/mccall_fitted_vfi.md
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@@ -58,7 +58,7 @@ import quantecon as qe
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## The algorithm
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The model is the same as the McCall model with job separation we {doc}`studied before <mccall_model_with_separation>`, except that the wage offer distribution is continuous.
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The model is the same as the McCall model with job separation that we {doc}`studied before <mccall_model_with_separation>`, except that the wage offer distribution is continuous.
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We are going to start with the two Bellman equations we obtained for the model with job separation after {ref}`a simplifying transformation <ast_mcm>`.
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The unknowns here are the function $v$ and the scalar $d$.
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The difference between these and the pair of Bellman equations we previously worked on are
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The differences between these and the pair of Bellman equations we previously worked on are
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1.in {eq}`bell1mcmc`, what used to be a sum over a finite number of wage values is an integral over an infinite set.
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1.In {eq}`bell1mcmc`, what used to be a sum over a finite number of wage values is an integral over an infinite set.
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1. The function $v$ in {eq}`bell2mcmc` is defined over all $w \in \mathbb R_+$.
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The function $q$ in {eq}`bell1mcmc` is the density of the wage offer distribution.
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To see the issue, consider {eq}`bell2mcmc`.
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Even if $v$ is a known function, the only way to store its update $v'$
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Even if $v$ is a known function, the only way to store its update $v'$
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is to record its value $v'(w)$ for every $w \in \mathbb R_+$.
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Clearly, this is impossible.
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This method
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1. combines well with value function iteration (see., e.g.,
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1. combines well with value function iteration (see, e.g.,
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{cite}`gordon1995stable` or {cite}`stachurski2008continuous`) and
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1. preserves useful shape properties such as monotonicity and concavity/convexity.
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