wages_inversion {IGCities}

Function to compute equilibrium wages that make the model labor in every location in equal to the observed data. It finds the w's such that equation (3.2) holds.

Description

Function to compute equilibrium wages that make the model labor in every location in equal to the observed data. It finds the w's such that equation (3.2) holds.

Usage

wages_inversion(
  N,
  w_init,
  theta,
  tau,
  L_i,
  L_j,
  nu_init = 0.05,
  tol = 10^-10,
  maxiter = 10000
)

Arguments

N

Integer - Number of locations.

w_init

Initial vector of wages.

theta

Float - Commuting elasticity.

tau

NxN matrix - Commuting cost matrix across all locations.

L_i

Nx1 matrix - Number of residents in each location.

L_j

Nx1 matrix - Number of workers in each location.

nu_init

Float - Convergence parameter to update wages. Default nu=0.01.

tol

Float - Maximum tolerable error for estimating total labor. Default tol=10^-10.

maxiter

Integer - Maximum number of iterations for convergence. Default maxiter=10000.

Value

A list with equilibrium wages and probability of workers in each location working in every other location.