Please see in the following screenshot the homework on coding. The link to access the Matlab code version 4 is here: https://drive.google.com/drive/folders/1_dKVYgsbYEnb5uqYQlUUnJ4WADe9ucD0?usp=sharing.

Thanks

Econ 741 (Fall 2020) Problem Set Corina Mommaerts (borrowed heavily from Cormac O'Dea) Please turn in your code as well as a write-up of answers to the following questions: 1. Consider version 4 of the Matlab code. Add in a binary labor supply choice. In particular: Households will see the income draw and can then decide to work or not. If households decide to work, they will get the income. If not, they will get no income and any consumption will have to come from their accumulated wealth. You will need to decide on a utility function that now depends on both consumption and leisure. You could, but do not have to, use this one: 817 Lh 10 (1) where x, or and 'y are parameters of the utility function, L is a leisure endowment and h are hours of work if the household chooses to work. I would recommend solving here using value function maximization rather than Euler equation rootnding. Notwithstanding the fact that approximation error will be worse. 2. Find (through some trial and error) some set of parameters that produces non-trivial labor supply proles (by nontrivial I mean not ones where everyone works each period or everyone doesn't work each period). Report these parameter values. Hint. It is often not easy to nd starting parameters that give nontrivial processes. Conesa et al. AER 2009, Section VC, might be a good place to start in terms of getting parameters into the right region. But don't expect their parameters to 'work' as the underlying economic problem is different. 3. Take this simulated data, and produce the following graphs: Simulated path of potential income over the lifecycle for an example individual. Simulated mean path of potential income over the lifecycle. Simulated path of wealth over the lifecycle for an example individual. Simulated mean path of wealth over the lifecycle. Simulated labor supply over the lifecycle for an example individual. Simulated mean labor supply over the lifecycle. Labor supply policy functions (i.e. the relationship between labor supply and state variables like wealth) or any other graphs you nd interesting