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Computation of Equilibria in OLGModels with Many Heterogeneous Households

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Author Info
Sebastian Rausch () (Department of Economics, University of Duisburg-Essen, Germany; Ruhr Graduate School in Economics, Essen, Germany)
Thomas F. Rutherford () (The Swiss Federal Institute of Technology (ETH-Zürich), Switzerland)

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Abstract

This paper develops a decomposition algorithm by which a market economy with many households may be solved through the computation of equilibria for a sequence of representative agent economies. The paper examines local and global convergence properties of the sequential recalibration (SR) algorithm. SR is then demonstrated to efficiently solve Auerbach- Kotlikoff OLG models with a large number of heterogeneous households. We approximate equilibria in OLG models by solving a sequence of related Ramsey optimal growth problems. This approach can provide improvements in both efficiency and robustness as compared with simultaneous solution methods.

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Publisher Info
Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 08/90.

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Length: 53 pages
Date of creation: Jun 2008
Date of revision:
Handle: RePEc:eth:wpswif:08-90

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Related research
Keywords: Computable general equilibrium; Overlapping generations; Microsimulation; Sequential recalibration;

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Find related papers by JEL classification:
C68 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computable General Equilibrium Models
C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Microeconomic Data
D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving

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  14. Rasmussen, Tobias N. & Rutherford, Thomas F., 2004. "Modeling overlapping generations in a complementarity format," Journal of Economic Dynamics and Control, Elsevier, vol. 28(7), pages 1383-1409, April. [Downloadable!] (restricted)
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