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Questions tagged [olg]

With reference to overlapping generation models (OLG models).

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Necessary conditions in overlapping generations model (OLG)

The consumer at each period maximizes \begin{equation} \displaystyle\sum_{i=1}^{I}\beta^{i-1}U(c^i_{t+i},l^i_{t+i}) , t=0,1,2,3,... \end{equation} subject to \begin{equation} (1+\eta_t)c^{i}_t+...
Franciscolli's user avatar
3 votes
1 answer
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State variable or jump variable

In my OLG model, I have two law of motions for capital and pollution \begin{align*} &K_{t+1} = s_t\\ &P_{t+1} = (1-\delta)P_t+\rho K_t \end{align*} where $K$ is capital, $s$ is the saving from ...
Benson's user avatar
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Can anyone help me derive saving from the OLG model? (Just check to see if my start is okay please)

Question assumptions: Consider the effect of a capital tax on the OLG model. The government imposes a capital tax rate at the rate $\tau\in[0,1)$ and pays all the tax revenues back to the old in a ...
Tony456's user avatar
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Capital accumulation equation in steady-state (OLG model)

So I was given a question to derive the equation for aggregate capital accumulation. $K_{t+1}$, and explain if the economy has a stationary steady-state with zero growth. The model is as follows, ...
tonissimoe's user avatar
1 vote
1 answer
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Are overlapping generation (OLG) models extensions of a DSGE model?

Are overlapping generation models (OLG) extensions of a dynamic stochastic general equilibrium (DSGE) model? Or aren't these DSGE per se?
Beck Batucada's user avatar
2 votes
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Deriving FOC in OLG model with Cobb Douglas utility

I'm trying to derive the first order condition in a partial equilibrium overlapping generations model. The setup contains both consumption and housing goods. $$ \underset{c_{t+i},h_{t+i}}{max}U_{t}^{...
Mr. A's user avatar
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1 answer
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Why in maximization in OLG model with 1 generations we assume that both consumptions are positive?

I have an OLG model with constant level of technology and population. The utility of agent who is born in period t is: U() = c1,t + 1/1+pC2,t+1 My textbook asks me to write the maximization problem ...
Anya Pilipentseva's user avatar
1 vote
1 answer
317 views

Perpetual Youth Model

I am reading the famous paper of Blanchard,1985. There are some fundamental stuff that I did not really get. 1) Why they call it "perpetual youth"? 2) On page 225, he mentions the cohort size. So, ...
optimal control's user avatar
3 votes
0 answers
743 views

Market clearing condition with Walras law

I have a diamond overlapping model The question is as follows Let us consider an infinitely lived production economy populated at time t by $N_t$ identical and perfectly competitive adult ...
b11bb's user avatar
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7 votes
2 answers
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"If $\lambda$ is greater than than 1, the system explodes." Why does the system explode?

David Romer in his textbook Advanced Macroeconomics (Third Edition) writes regarding the speed of convergence of the Diamond model the following: (Pg. 83) Equation (2.60) [$k_{t+1}={1\over{(1+n)(1+g)}...
Bensstats's user avatar
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2 votes
2 answers
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In Diamond's OLG model, why is capital equal to saving by the young in previous period?

In Diamond's OLG model, why is capital in the next period equal to total savings by the young in the current period? What happeend to the pre-existing capital? Surely it doesn't just cease to exist? ...
few's user avatar
  • 21
2 votes
1 answer
372 views

OLG - Government Budget Constraint

Consider a two period OLG model where each young agent recieves an endowment of $w$ units of the single commodity good in the 1st period of his/her life, and nothing in the second period. Each ...
user11767's user avatar
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2 votes
1 answer
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Interest/Rental Rate is today's or tomorrow's MPK?

I recently posted and have since deleted a question regarding Exercise 2.1 in McCandless's "The ABCs of RBCs." The exercise involves deriving a first-order difference equation describing aggregate ...
economicist's user avatar
1 vote
1 answer
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How do I find out which form of utility function is being used?

Can someone tell my how i can figure out which type of utility function the following maximization problem has. It is for an overlapping generations model. $$\underset{x'}{\max} x'\big(E_t (P_{t+1}+...
nvanlaer's user avatar
8 votes
2 answers
1k views

What is the true source of dynamic(Pareto) inefficiency in OLG models?

This question confuses me for some time. My first impression is that Pareto sub-optimality is due to feature that old generations will consume everything without any incentive to trade. But after ...
Metta World Peace's user avatar