Working Paper Series
James W. Albrecht, Bertil Holmlund and Harald Lang
Comparative Statics in Dynamic Programming Models with an Application to Job Search
Abstract: This paper presents a technique for qualitative
comparative statics analysis in dynamic programming models. Let the value
function v be the fixed point of a contraction mapping which depends
differentially on some exogenous parameter theta. Then the derivative of v
with respect to theta exists and is also the fixed point of a contraction
mapping. Since this derivative is the fixed point of a contraction mapping
its qualitative properties can be investigated using mathematical
induction. This comparative statics methodology is illustrated with an
application to a model of job search.
Keywords: Qualitative comparative statics analysis; dynamic programming; job search model; (follow links to similar papers)
JEL-Codes: C61; J60; (follow links to similar papers)
21 pages, December 1986, Revised August 1991
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