The A-K Model: It's Past, Present, and Future
Almost two decades have passed since the development of the prototype of the Auerbach-Kotlikoff dynamic life-cycle simulation model. The model has been used to examine a host of policies, including tax reform, tax cuts, investment incentives, tax progressivity, expansion of social security, government spending, monetary policy, endogenous growth, the size of the informal sector, human capital accumulation, and educational policy. It has also been used to study demographic change, the timing of policy impacts, the efficiency gains from fiscal reforms, and the effects of fiscal policies on both the intra- and intergenerational distributions of economic welfare. Auerbach and Kotlikoff and their co-authors have done much of this research. The rest has been done by other economists in academia, government, and multilateral lending institutions, many of whom have developed their own versions of the model. This paper describes the origins of the A-K Model, its current structure, the lessons learned using it, and some of the questions that remain to be addressed. It also considers two issues -- tax reform and social security privatization -- in illustrating the model's current capacities.
|Date of creation:||Aug 1998|
|Publication status:||published as Harrison, Glenn, Svend E. Hougaard Jensen, Lars Haagen Pedersen, and Thomas F. Rutherford (eds.) Using Dynamic CGE Models for Policy Analysis. North Holland, 2000.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Auerbach, Alan J & Kotlikoff, Laurence J & Skinner, Jonathan, 1983.
"The Efficiency Gains from Dynamic Tax Reform,"
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Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(1), pages 81-100, February.
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- Shoven, John B. & Whalley, John, 1972. "A general equilibrium calculation of the effects of differential taxation of income from capital in the U.S," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 281-321, November.
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- Chamley, Christophe, 1981. "The Welfare Cost of Capital Income Taxation in a Growing Economy," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 468-496, June.
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- Alan J. Auerbach & Laurence J. Kotlikoff & Robert Hagemann & Giuseppe Nicoletti, 1989. "The Dynamics of an Aging Population: The Case of Four OECD Countries," NBER Working Papers 2797, National Bureau of Economic Research, Inc.
- Laitner, John, 1984. "Transition time paths for overlapping-generations models," Journal of Economic Dynamics and Control, Elsevier, vol. 7(2), pages 111-129, May. Full references (including those not matched with items on IDEAS)
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