Computation of Equilibria in OLG Models with Many Heterogeneous Households
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Author(s)
Rausch, Sebastian
Rutherford, Thomas Fox
Date Issued
June 2010
Journal
Computational Economics
Publisher
Springer Netherlands
Citation
Rausch, Sebastian, and Thomas F. Rutherford. “Computation of Equilibria in OLG Models with Many Heterogeneous Households.” Computational Economics 36.2 (2010) : 171-189.
Version
Author's final manuscript
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. The SR
algorithm 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 integrated complementarity-based solution methods.
MIT Department
MIT Energy Initiative
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Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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DOI of Published Version
https://doi.org/10.1007/s10614-010-9229-8
