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Computation of Equilibria in OLG Models with Many Heterogeneous Households


  • Sebastian Rausch


  • Thomas Rutherford


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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Suggested Citation

  • Sebastian Rausch & Thomas Rutherford, 2010. "Computation of Equilibria in OLG Models with Many Heterogeneous Households," Computational Economics, Springer;Society for Computational Economics, vol. 36(2), pages 171-189, August.
  • Handle: RePEc:kap:compec:v:36:y:2010:i:2:p:171-189 DOI: 10.1007/s10614-010-9229-8

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    References listed on IDEAS

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    Cited by:

    1. Melnikov, N.B. & O'Neill, B.C. & Dalton, M.G., 2012. "Accounting for household heterogeneity in general equilibrium economic growth models," Energy Economics, Elsevier, vol. 34(5), pages 1475-1483.
    2. Sebastian Rausch & Thomas Rutherford, 2010. "Computation of Equilibria in OLG Models with Many Heterogeneous Households," Computational Economics, Springer;Society for Computational Economics, vol. 36(2), pages 171-189, August.
    3. Andreas PEICHL, "undated". "The Benefits of Linking CGE and Microsimulation Models - Evidence from a Flat Tax analysis," EcoMod2008 23800106, EcoMod.
    4. Rausch, Sebastian & Metcalf, Gilbert E. & Reilly, John M., 2011. "Distributional impacts of carbon pricing: A general equilibrium approach with micro-data for households," Energy Economics, Elsevier, vol. 33(S1), pages 20-33.
    5. Balistreri, Edward J. & Hillberry, Russell H. & Rutherford, Thomas F., 2010. "Trade and welfare: Does industrial organization matter?," Economics Letters, Elsevier, vol. 109(2), pages 85-87, November.
    6. Magnani, Riccardo & Mercenier, Jean, 2009. "On linking microsimulation and computable general equilibrium models using exact aggregation of heterogeneous discrete-choice making agents," Economic Modelling, Elsevier, vol. 26(3), pages 560-570, May.
    7. repec:eee:eneeco:v:65:y:2017:i:c:p:87-97 is not listed on IDEAS
    8. Gauthier de Maere d'Aertrycke & Olivier Durand-Lasserve & Marco Schudel, 2014. "Integration of Power Generation Capacity Expansion in an Applied General Equilibrium Model," Working Papers 2014.71, Fondazione Eni Enrico Mattei.
    9. Kathy Hibbard & Anthony Janetos, 2013. "The regional nature of global challenges: a need and strategy for integrated regional modeling," Climatic Change, Springer, vol. 118(3), pages 565-577, June.
    10. Jansson, Torbjorn & Bakker, Martha M. & Boitier, B. & Fougeyrollas, A. & Helming, John F.M. & van Meijl, Hans & Verkerk, P.J., 2008. "Linking models for land use analysis: experiences from the SENSOR project," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44169, European Association of Agricultural Economists.
    11. Boeters, Stefan & Savard, Luc, 2013. "The Labor Market in Computable General Equilibrium Models," Handbook of Computable General Equilibrium Modeling, Elsevier.

    More about this item


    Computable general equilibrium; Overlapping generations; Microsimulation; Sequential recalibration; C68; C81; D61; D91;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making


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