The thesis studies quantitative implications of the real business cycle models
with heterogeneous agents. The questions I ask are: First, Can the studied
models not only replicate the aggregate time series facts but also the distributions
of individual quantities such as consumption, hours worked, income,
wealth observed in the micro data? Second, Does incorporating heterogeneity
enhance the aggregate performance of the representative consumer models?
To simplify the characterization of the equilibria ...

The thesis studies quantitative implications of the real business cycle models
with heterogeneous agents. The questions I ask are: First, Can the studied
models not only replicate the aggregate time series facts but also the distributions
of individual quantities such as consumption, hours worked, income,
wealth observed in the micro data? Second, Does incorporating heterogeneity
enhance the aggregate performance of the representative consumer models?
To simplify the characterization of the equilibria in the models, I use results
from aggregation theory.
The thesis is composed of three chapters, each of which can be read independently.
A l l chapters are joint with Serguei Maliar.
The first chapter analyzes the predictions of a heterogeneous agents version
of the model by Kydland and Prescott (1982). I calibrate and solve
the model with eight heterogeneous agents to match the aggregate quantities
and the distributions of productivity and wealth in the U.S. economy. I find
that the model can generate the distributions of consumption and working
hours which are consistent with patters observed in the data. I show that
incorporating the heterogeneity helps to improve on the model's predictions
with respect to labor markets. In particular, unlike a similar representative
agent setup, the heterogeneous model can account for the Dunlop-Tarshis
observation of weak correlation between productivity and hours worked.
The second chapter constructs a heterogeneous agents version of the indivisible
labor model by Hansen (1985) with search and home production. I
calibrate and solve the model with five agents to replicate aggregate quantities
and differences in productivity across agents in the U.S. economy. The
model does reasonably well at reproducing cyclical behavior of the macroeconomic
aggregates. At the individual level, it can account for the stylized
facts that more productive individuals (i) enjoy a higher employment rate,
(ii) have a lower volatility of employment, (iii) spend less time working at
home. It is important to emphasize that none of the heterogeneous models
with home production existing in the literature has been able to explain fact
(ii).
The third chapter studies distributive dynamics of wealth and income in
a heterogeneous agents version of Kydland and Prescott's (1982) model. I
show that imder the assumptions of complete markets and Cobb-Douglas
preferences, the evolution of wealth and income distributions in the model
can be described in terms of aggregate variables and time-invariant agent-specific
parameters. This allows me to characterize explicitly the behavior of
such inequality measvures as the coefficient of variation of wealth and income
over the business cycle. I test the model's implications by using the time
series on the U.K. economy. The predictions are in agreement with the data.

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