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Business Cycle Dynamics of a New Keynesian Overlapping Generations Model with Progressive Income Taxation

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  • Burkhard Heer
  • Alfred Maussner

Abstract

In our dynamic optimizing sticky price model, agents are heterogeneous with regard to their age and their productivity. We find that the business cycle dynamics in the OLG model in response to both a technology shock and a monetary shock are similar, but not completely identical to those found in the corresponding representative-agent model. In particular, working hours in the OLG model decrease in response to a positive technological shock, since for young workers the income effect dominates the substitution effect. This is in line with the adverse effect of productivity shocks on employment found in structural vector autoregressions.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1692.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1692

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Keywords: fluctuations; unanticipated inflation; wealth distribution; income distribution; progressive income taxation; Calvo price staggering;

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Citations

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Cited by:
  1. Burkhard Heer, 2013. "A note on the cyclical behaviour of the income distribution," OECD Journal: Journal of Business Cycle Measurement and Analysis, OECD Publishing,CIRET, vol. 2013(1), pages 1-7.
  2. Heer, Burkhard & Süssmuth, Bernd, 2013. "Tax bracket creep and its effects on income distribution," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 393-408.
  3. Burkhard Heer & Alfred Maußner, 2009. "Education Briefing: Computation of business-cycle models with the Generalized Schur method," Indian Growth and Development Review, Emerald Group Publishing, vol. 2(2), pages 173-182, September.
  4. Yann Algan & Xavier Ragot, 2010. "Monetary policy with Heterogeneous Agents and Borrowing Constraints," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(2), pages 295-316, April.

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