# problem4 - Last Problem Set Econ 210 Core Macro Monika...

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Last Problem Set :( Econ 210 Core Macro Monika Piazzesi Stanford University Due Wednesday, October 20 in class 1. Exercise 5.5 in SLP, p. 107. 2. Search Workers receive wage o f ers every period, these wage o f ers are drawn from i.i.d. distribution ( ) Workers are risk neutral, receive unem- ployment bene f ts each period while they are unemployed and dis- count the future with . The value function for the employed is ( )= +  ( ) and so = 1 The value function for the unemployed is = + Z max ©  ( ) ª  ( ) We can use the last two equations to derive a Bellman equation based on a single value function ( · ) as ( )=max ½ 1  + Z ( 0 )  ( 0 ) ¾ (1) 1

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The reservation wage satis f es 1 = + Z 0 max ½ 1 1 ¾  ( ) = + 1 Z max
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problem4 - Last Problem Set Econ 210 Core Macro Monika...

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