Can Dynare simulate/solve dynamic sector choice model

[lemonadelaur]

Hi all,

I am now modeling individual's dynamic sector choice -- i.e. if the continuation utility (at time t) of choosing manufacturing is larger than that of choosing serive, the agent will choose manufacturing at time t; and vice versa.
Can Dynare do such modeling which is not smooth? Are there any tricks to make it possible?
Thanks a lot!

Best,
Laura

[SébastienVillemot]

In a stochastic setup, this kind of model cannot be solved with Dynare. You need to implement a global method for solving for the two value functions.

In a deterministic setup, it may be possible to solve this model using Dynare, if you are able to express the value functions (and then you can compare them using the < or > operators)

[lemonadelaur]

Thanks, Sébastien!