Simulation Analysis of an OLG Model with Heterogeneous Preferences and Learning Abilities

Angelina Shpilevaya, Andrey Polbin and Sergey Sinelnikov-Murylev
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Sergey Sinelnikov-Murylev: Russian Foreign Trade Academy, Moscow, Russia

HSE Economic Journal, 2024, vol. 28, issue 1, 44–80

Abstract: This publication is a continuation of the co-authors’ article on the development of an OLG model with the higher education sector for a representative country where a unified state exam is taken. The key assumptions of the model that distinguish it from a number of others are the heterogeneity of individuals in terms of risk aversion, the discount factor, and the Unified State Exam scores. Based on the proposed model, it is possible to estimate the response of key macroeconomic indicators such as consumption, investment, government expenditure and out put in response to various government policies in the field of higher education. In this part of the work, numerical simulation is carried out based on the specification proposed by the authors in the previous article. The paper analyzes various government policy scenarios aimed at stimulating the accumulation of human capital. Scenarios with the state allocating additional funds for higher education, a different distribution of budget allocations, changes in tax rates and budget structure are considered. We also analyze the response of variables to changes in the variance of individuals' wages. The model is calibrated using Russian statistical data. Using the proposed mo­del, we show the importance of taking microfoundations into account in educational policy ana­lysis. Analysis of the stability of estimates using the example of calibration of distributions of heterogeneous parameters from alternative distributions showed a strong sensitivity of the research results to the choice of parameters of the distribution functions of preferences and abilities of individuals, which indicates the need to correctly take into account heterogeneity in the problems under consideration. Without correctly taking into account the heterogeneity in the problems under consideration, no estimation of scenarios for changes in educational policy can be adequate.

Keywords: overlapping generations model; human capital; risk aversion; heterogeneity; higher education; numerical simulation (search for similar items in EconPapers)
JEL-codes: C63 E27 (search for similar items in EconPapers)
Date: 2024
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