Analyzing fiscal policies in a heterogeneous-agent overlapping-generations economy

Nishiyama, Shinichi and Smetters, Kent (2014) Analyzing fiscal policies in a heterogeneous-agent overlapping-generations economy. In: Handbook of Computational Economics :. Elsevier, pp. 117-160. ISBN 1574-0021

Abstract

The overlapping generations (OLG) life-cycle model with heterogeneous agents has become the main workhorse for evaluating the welfare and macroeconomic effects of major fiscal policy changes, including reforms to tax and social insurance systems. This chapter shows how to construct and solve a OLG model with idiosyncratic shocks, which allows for analyzing the inter- and intra-generational welfare and macroeconomic impact of policy changes.