Conditional restrictions on agent distribution stats

1

Consider a textbook Aiyagari model and suppose I’d like to compute median wealth. I can do the following:

First, I define a function that gives me “wealth”, and I call it “A”:

FnsToEvaluate.A = @(aprime,a,eps,theta) a;

Then, after computing the Stationary Distribution, I call the function:

AllStats=EvalFnOnAgentDist_AllStats_Case1(StationaryDist,Policy,FnsToEvaluate,...
    Params,[],n_d,n_a,n_z,d_grid,a_grid,z_grid,simoptions);

Median wealth is then given by

AllStats.A.Median

So far so good. But suppose that I have a slightly more complicated model, say Aiyagari with an occupational choice (entrepreneur vs worker) and I would like to compute the median wealth conditional on being a worker and separately conditional on being an entrepreneur.

I used the following but it does not work (it always gives zero as a result)

% Assets owned by entrepreneurs
FnsToEvaluate.A_entre = @(aprime,a,eps,theta,r,w,vi,delta,lambda,gamma) a*f_Entre(aprime,a,eps,theta,r,w,vi,delta,lambda,gamma);

% Assets owned by workers
FnsToEvaluate.A_work = @(aprime,a,eps,theta,r,w,vi,delta,lambda,gamma) a*(1-f_Entre(aprime,a,eps,theta,r,w,vi,delta,lambda,gamma));

Note that in this case, f_Entre is a function that returns 1 if entre, 0 if worker.

I think I understand what is going on: in the case above I set wealth equal to zero whenever the individual is NOT an entrepreneur. Since there are only 5-10% entre in the economy, then most wealth levels are set to 0 and therefore the median is also 0.
What I would like to do is to set the distribution, not the wealth values, equal to 0 if the guy is NOT an entre, and then renormalize. I did this manually and it works well but it would be great to do this automatically with the toolkit, if possible.

I had a look at the toolkit function EvalFnOnAgentDist_AllStats_Case1 and I was wondering if the part on “conditional restrictions”, around line 140, might help.

My manual code:

a_vec = repmat(a_grid,[1,n_z(1),n_z(2)]);
a_vec = a_vec(:);
StationaryDist_Entre = (pol_e==1).*StationaryDist;
StationaryDist_Entre = StationaryDist_Entre/sum(StationaryDist_Entre,"all");
StationaryDist_Work = (pol_e==0).*StationaryDist;
StationaryDist_Work = StationaryDist_Work/sum(StationaryDist_Work,"all");
A_entre_Median = quantili(a_vec(:),StationaryDist_Entre(:),0.50);
A_work_Median = quantili(a_vec(:),StationaryDist_Work(:),0.50);

and the function quantili (not included here but available on request) does the standard task of computing percentiles.

2

The ‘conditional restrictions’ is for exactly this purpose, but I am not sure it really handles AllStats at the moment (it is a vestigial piece from AggVars where it did work). I’ll take a look this week and get it working properly.

The idea is that you can put in a ‘conditional restriction’ via simoptions. The conditional restriction must be a function that evaluates to 1 (or 0), and then only points that satisfy this restriction (that evaluate to 1) will be uses as the basis for computing statistics.

I’ll post again once I clean it up and check that it does work as intended.

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3

Great, thanks! What I can do now is to compute e.g. the entrepreneurs’ share of total wealth as

AllStats.A_entre.Mean/(AllStats.A_entre.Mean+AllStats.A_work.Mean);

The reason is that the command AllStats.A_entre.Mean computes the integral of assets with respect to the population distribution, let’s call it D, and assets are recoded as 0 if the individual is not an entrepreneur. So I get the total assets owned by entrepreneurs.

But if I wanted the average amount of assets conditional on being an entrepreneur I would need to restrict the distribution only to entrepreneurs. Let’s call this new distribution as D_E. Then the average assets of entrepreneurs are equal to the integral of assets with respect to this new distribution, D_E.

(I’m sure you already know this of course, I just write here for other users and to my future self o/w I forget :slight_smile:

4

Here is an example of how to do conditional restrictions in the Aiyagari (1994) model. The restriction in this example is rather contrived, but point is just to show how it is done.

Say we already have the function we want to evaluate,
FnsToEvaluate.Assets=@(aprime,a,z) a;
And we want to evaluate assets conditional on the shock z being greater than 1.

Then we just set up
simoptions.conditionalrestrictions.bigz=@(aprime,a,z) (z>1);
and then run AllStats
AllStats=EvalFnOnAgentDist_AllStats_Case1(StationaryDist, Policy, FnsToEvaluateIneq,Params, [],n_d, n_a, n_z, d_grid, a_grid,z_grid,simoptions);

Then the conditional mean is in
AllStats.bigz.Assets.Mean
and the conditional median is in
AllStats.bigz.Assets.Median
etc.

We can double check that this is doing the same thing by taking advantage of the fact that the conditional mean is easy to calculate in an alternative manner, specifically set up
FnsToEvaluate.test1=@(aprime,a,z) a*(z>1);
FnsToEvaluate.test2=@(aprime,a,z) (z>1);
Then run AllStats again, and calculate
AllStats.test1.Mean/AllStats.test2.Mean
and we can see that this gives exact same answer as when we used the simoptions.conditionalrestrictions approach. Obviously though this alternative only really works for conditional mean, and for things like the conditional median we need to take the simoptions.conditionalrestrictions approach.

Note, if you want to do something like, assets for people in lowest decile of income, you can run AllStats twice, the first time to get the cutoff for the income decile, and then use this to create a conditional restriction and call AllStats a second time.

Note, simoptions.conditionalrestrictions is currently only implemented in infinte-horizon models (not currently in finite-horizon models)

Just a note to myself, the code could be sped up by reusing Values across all the unconditional and then all the conditional restrictions, requires reorganizing the order of operations.

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5

Hi Robert,

your explanation is very helpful, thanks! Regarding your last point

Note, if you want to do something like, assets for people in lowest decile of income, you can run AllStats twice, the first time to get the cutoff for the income decile, and then use this to create a conditional restriction and call AllStats a second time.

I would like to do something similar, namely to compute the average tax rate for the top 1 percent of individuals in the income distribution. Then, following your suggestions, I do

% Average tax rates for top percentiles of the income distribution
% Step 1: compute p99,p97,p95,p90 of IncomePreTax distribution
Params.p95 = AllStats.IncomePreTax.QuantileCutoffs(20);

% Step 2: set conditionalrestrictions for IncomePreTax>=p99, etc. and run
% again the AllStats command
simoptions.conditionalrestrictions.p95 = @(aprime,a,eps,theta,K_to_L,alpha,vi,delta,lambda,gamma,lam_hsv,tau_hsv,p95) ...
    f_IncomePreTax(aprime,a,eps,theta,K_to_L,alpha,vi,delta,lambda,gamma,lam_hsv,tau_hsv)>=p95;

AllStats=EvalFnOnAgentDist_AllStats_Case1(StationaryDist,Policy,FnsToEvaluate,...
    Params,[],n_d,n_a,n_z,d_grid,a_grid,z_grid,simoptions);

% Step 3: Compute aggregates of PerIncTax and IncomePreTax, given the restrictions
% Then take the ratio b/w the two aggregates to get the average tax rate
atr_top5 = AllStats.p95.PerIncTax.Mean/AllStats.p95.IncomePreTax.Mean;

Howver, I have a question regarding Step 1 of the above method. How do I find the p99 in QuantilesCutoffs? I’ve seen that QuantilesCutoffs have 21 points. I would like to compute the average tax rate for the top 1, top 3, top 5 and top 10.

Thanks!

6

Default is 20 ventiles, but you can switch to percentiles by just
simoptions.nquantiles=100;

(In the default, 20 ventiles, you will get 20 quantile means. Between the ventiles are 19 cut-offs, and the output also reports the min and max in the cut-offs, hence why QuantileCutoffs has 21 entries.)

Once you have the cut-offs you will be able to set up all four conditional restrictions and then make a single call to AllStats.

To be clear, multiple conditional restrictions can be set up like,
simoptions.conditionalrestrictions.bigz=@(aprime,a,z) (z>1);
simoptions.conditionalrestrictions.midz=@(aprime,a,z) (z==1);
simoptions.conditionalrestrictions.smallz=@(aprime,a,z) (z<1);

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7

Thanks! The code works as intended, but the call to AllStats takes a great amount of time. Just to give an idea, to solve the model in partial equilibrium it takes about 12 seconds, but the VFI and the Distribution take about 1 second only. All the rest is spent calling this line:

AllStats=EvalFnOnAgentDist_AllStats_Case1(StationaryDist,Policy,FnsToEvaluate,...
    Params,[],n_d,n_a,n_z,d_grid,a_grid,z_grid,simoptions);

Using the Matlab profiler I discovered that the bottleneck is the function StatsFromWeightedGrid, especially the computation of quintiles (whichstats(6)=1) and this loop in particular:

for ll=2:nquantiles-1
                QuantileMeans(ll)=(sum(WeightedSortedValues(quantilecutoffindexes(ll-1)+1:quantilecutoffindexes(ll)))-SortedValues(quantilecutoffindexes(ll))*(CumSumSortedWeights(quantilecutoffindexes(ll))-ll/nquantiles)+SortedValues(quantilecutoffindexes(ll-1))*(CumSumSortedWeights(quantilecutoffindexes(ll-1))-(ll-1)/nquantiles))*nquantiles;
end

It’s quite good that the toolkit allows the user to set simoptions.whichstats which tells the code to compute only a subset of all possible statistics. In my case I set whichstats(6)=1 since I need the quintiles. But I need only the cutoffs, not the means and the means take a lot of time (see above). So I was wondering if it is possible to either (1) speed up the quantiles part of StatsFromWeightedGrid or (2) add the option to do only the quintiles cutoffs and not the quintile means, or (3) let the user choose the quantiles to compute in simoptions, instead of computing all 20 (in my case, for example, I need only 3 or 4).

Option (3) would allow the user to pass something like qvec = [0.99, 0.95, 0.90] as a field of simoptions.

Thanks in advance!

P.S. I ask this because I’d like to do some estimation of parameters. I run AllStats only after solving the model of course, but I have to run it before computing the estimation targets…

8

I’m going to sit down sometime early next week and overhaul conditional restrictions. Get them faster, working same way across FHorz and InfHorz, and get them working with PTypes. I’ll report back once done :smiley:

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9

I’ve improved speed for quantiles, set simoptions.whichstats(6)=2
(How to cut runtimes for life-cycle profiles or 'AllStats' when you don't need all the stats (simoptions.whichstats) - #5 by robertdkirkby )

Next is to get conditional restrictions to PTypes and FHorz.

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10

simoptions.conditionalrestrictions now works in AllStats. With and without PType. For both FHorz and InfHorz.

I still want to add it to AgeConditionalStats.

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11

simoptions.conditionalrestrictions now works with LifeCycleProfiles_FHorz_Case1 and the PType version.

Actually I ended up overhauling a lot of how FnsToEvaluate are done behind the scenes.

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12

Note: I deliberately left is so conditionalrestrictions do not work with AggVars (so that it is clear they cannot currently be used as part of general equilibrium conditions). Obviously the actual AggVars values are anyway generated as part of AllStats if you are interested in them.

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