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On the Use of Projection Methods in the Computation of OLG Models Zur Berechnung von OLG-Modellen mit Hilfe von Projektionsmethoden

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Author Info

  • Burhard Heer

    () (Universität zu Köln)

  • Mark Trede

    () (Universität zu Köln)

Abstract

We compare projection methods with the standard value function grid algorithm in order to solve overlapping generations models. We apply the methods to a particular 60-period OLG model with elastic labor supply in order to study the effects of unfunded public pensions on aggregate savings and employment. For given accuracy, projection methods are found to dominate standard value function grid methods in terms of speed and required storage capacity. Furthermore, we apply projection methods to problems characterized by a multi-dimensional state space. Our results suggest that such more complex problems are also solvable with the help of ordinary personal computers using projection methods, while the use of value function grid methods may require excessive computer time and storage capacity with regard to current PC technology. Numerical solution methods, overlapping generations, projection methods, value function grid.

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Bibliographic Info

Article provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.

Volume (Year): 220 (2000)
Issue (Month): 1 ()
Pages: 32-47

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Handle: RePEc:jns:jbstat:v:220:y:2000:i:1:p:32-47

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Related research

Keywords: Numerical Solution Methods; overlapping generations; protection methods; value function grid;

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