@INIATLIZE--AGGREGATE UNCERTAINTY, WITH POLITICAL INTEVENTION@ @RENTIER EQUILIBRIUM@ @Test if renegotiation proof once state known so that there would be no renegotiation even if there were no political intervention. Test is aborted in rentier equilibrium@ new; cls; output file=c:\gauss\mg.doc reset; x=zeros(100,25); " Tests of Equilibrium Conditions"; " 1.0 indicates the condition is satisfied," " 0.0 indicates a failure."; " "; "Aggregate Uncertainty Model, Political Intervention";" "; " Description of Equilibrium"; " Rentiers lend wbar at thetaah."; " At t=1, Good poor have 1<=k<=kbar investment in states H, L ."; " At t=1, average poor have investment < 1" " Rich have kbar investment only in high states."; " Wage=0 at t=1 in High state, thetabl*kp in low state."; " "; @Parameters@ wbar= 1 ; kbar=10; M=2.1; thetagh=13; thetagl=3.65; thetaah=3.6; thetaal=1.01; thetabh=.999; thetabl=0.998; mgh=.05; mah=.25 ; mbh=1-mgh-mah; mgl=mgh; mal=mah; mbl=1-mgl-mal; @ Conditioning of types on state is vestigal from older models@ @Print parameter values@ format 8,4; "The parameter M represents M/N in the formal model"; "M";;M;;"wbar";;wbar;;"kbar";;kbar;; "High State"; " thetagh";;thetagh;;" thetaah";;thetaah;;" thetabh";;thetabh; " mgh " ;;mgh;;" mah ";;mah;; "mbh";;mbh; " Low State"; " thetagl";;thetagl;;" thetaal";;thetaal;;"thetabl";;thetabl; " mgl " ;;mgl;;" mal ";;mal;;"mbl";;mbl; "t=0 investment of poor farmers, kp =";; kp = (wbar)/(M-1); kp; " "; " Average Return in High State =";; thetabarH=mgh*thetagh+mah*thetaah+mbh*thetabh; thetabarH; " Average Return in Low State =";; thetabarL=mgl*thetagl+mal*thetaal+mbl*thetabl; thetabarL; "Constraints of the Equilibrium"; " "; " t=1 investment of good, poor in high state";; ig1H=kp*(1+thetagh-thetaah); ig1H;; "<=kbar ";; ig1test = ig1H.<=kbar; ig1test; " t=1 investment of good, poor in high state";; ig1H;; ">=1 ";; ig1test1 = ig1H.>=1; ig1test1; "t=1 investment of good, poor in low state";; ig1L=kp*thetagl+kp; ig1L;; ">= 1 ";; ig1Ltest = ig1L>=1; ig1Ltest; "Good poor cannot invest beyond kbar in state L"; igover1=(ig1L-1)/(1+kp*thetabl)+1; igover1;; "<=kbar ";; ig1Ktest= igover1<=kbar; ig1Ktest; "Average poor do not hire labor in state L or expand past one"; iatest = (thetaal.<=1+thetabl*kp)*((thetaal*kp).<=1); iatest; @ RENTIER MODEL--NO TEST FOR PRODUCTION OF RICH@ @ wheat1L=1+thetabarL; wheat1H=thetabarh+1+(wbar-1)*(mgh+mah)*thetaah; wheat1L;; "<= kbar ";; wheat1H;;@ wa1test =1; wa1test; @ TEST IF A MORATORIUM OCCURS ONLY IN LOW STATE@ " In state H, good poor investment if moratorium" ;; ig1hmor = 1+(kp*thetagh-1+kp)/(1+kp*thetabh); ig1hmor; " In state H, good poor vote against a moratorium";; vgh = ig1h.>=ig1hmor; vgh; " In state L, good poor vote for a moratorium ";; @NO RENEGOTIATION IN RENTIER MODEL, SO INTEREST STAYS AT thetaah@ vgl = kp*(1+thetagl-thetaah) .=1; Rltest1; " Lending at thetaal ";; @THE NEXT TWO CONSTRAINTS ARE STRONGER THAN NEEDED SINCE EVEN IF LOANS THETATGL OR THETAAL WERE MORE PROFITABLE THAN LOANS AT THETAAH ASSUMING NO MORATORIUM, THEY MAY NOT BE PROFITABLE IF A MORATORIUM IS VOTED IN THE LOW STATE, EVEN AT THESE LOWER INTEREST RATES@ @NO RENEGOTIATION IN RENTIER MODEL@ Rltest2 = RL.>= thetaal*(1-mbl); Rltest2; " Lending at thetagl ";; Rltest3 = RL .>= thetagl*(PH*mgh+PL*mgl); Rltest3; " Lending at thetagh ";; Rltest4 = RL.>= thetagh*PH*mgh; Rltest4; " Rich Farmers Do Not Lend More Than wbar -1";; ROWNtest = ROWN.>=RL; ROWNtest;" "; " Rich Farmers Do Not Hire Labor in Rentier Model ";; RPtest = 1; RPtest; " "; " Sufficient Labor Supply"; " Defaulting farmers in High State";; laborH=(M-1)*mbh; laborh; " Labor Demand in High State";; demandH = (M-1)*mgh*((1+thetagh-thetaah)*kp -1); demandH; " Supply > Demand in High State";; sdHtest=laborH>demandH; sdhtest; " Farmers willing to work at wage=thetabl*kp in Low State ";; laborL=(M-1)*(mbl); laborL; " Labor Demand in Low State ";; demandL = (M-1)*mgh*(igover1 -1); demandL; " Supply > Demand in Low State";; sdLtest=laborL>demandL; sdLtest; " "; "OUTPUT"; " t=1, Low State ";; out1L=wbar*thetabarL ; out1L; " t=1, High State ";; out1H=wbar*thetabarH ; out1H; " t=1, Expected Output";; out1=PH*out1H + PL*out1L; out1; " t =2, Low State ";; out2L= (M-1)*(mgl*(igover1)*thetagl + mal*kp*(1+thetaal) + (mbl-demandL/(M-1))*kp*thetabl); out2L; " t=2, High State ";; out2H= (M-1)*(mgh*(1+thetagh-thetaah)*kp*thetagh+mah*kp*thetaah) ; out2H; " t=2, Expected Output";; out2=PH*out2H + PL*out2L; out2; " "; "ADDED INVESTMENT AT t=1" ; " Low State ";; invest1L=demandL+(M-1)*(mgl*(1-kp)+thetaah*kp*mah); invest1L; " High State ";; invest1H=demandH+(M-1)*mgh*(1-kp); invest1H; " Expected Added Investment";; invest=PH*invest1H + PL*invest1L; invest; "SURPLUS" " Low State ";; surpL=out1L+out2L-wbar-invest1L; surpl; " High State ";; surpH = out1H + out2H-wbar-invest1H; surpH; " Expected Surplus ";; surp =PH*surpH + PL*surpL; surp; @ Store output for iterations of lambda in matrix form@ x[i,1]=lambda;x[i,2]=ig1test;x[i,3]=ig1test1;x[i,4]=ig1ltest;x[i,5]=Rltest1; x[i,6]=Rltest2; x[i,7]=Rltest3; x[i,8]=Rltest4;x[i,9]=ROWNtest; x[i,10]=Rptest; x[i,11]=sdhtest;x[i,12]=sdltest;x[i,13]=RL;x[i,14]=surp;x[i,15]=invest; x[i,16]=out2;x[i,17]=out1; x[i,18]=ROWN;x[i,19]=Rp;x[i,20]=kp;x[i,21]=wa1test;x[i,22]=iatest;x[i,23]=ig1Ktest;x[i,24]=vgh; x[i,25]=vgl; endo; output on; format 6,2; @Print output header@ "lamb ig1tst ig1ts1 ig1lts Rltst1 Rltst2 Rl3 Rltst4 ROWNt Rptest sdh sdl RL surp invst t=2out t=1out ROWN RP kp wa1test iatest ig1Ktest vgh vgl"; @Print output@ x; @Print output header@ "lamb ig1tst ig1ts1 ig1lts Rltst1 Rltst2 Rl3 Rltst4 ROWNt Rptest sdh sdl RL surp invst t=2out t=1out ROWN RP kp wa1test iatest ig1Ktest vgh vgl"; output off; end;