Computing minimal state space recursive equilibrium in OLG models with stochastic production

Jaime McGovern, Olivier Morand and Kevin Reffett

Economic Theory, 2013, vol. 54, issue 3, 623-674

Abstract: Using order-theoretic methods, we derive sufficient conditions for the existence, characterization, and computation of minimal state space recursive equilibrium (RE), as well as Stationary Markov equilibrium (SME) for various classes of stochastic overlapping generations models. In contrast to previous work, our methods focus on constructive methods. Our existence results are obtained for models that include public policy (e.g., social security policies, transfers, taxes, etc), production nonconvexities, elastic labor supply, non-monotone income processes, and long-lived agents. We distinguish conditions under which there exist various subclasses of minimal state space RE, including bounded, monotone, non-monotone, semicontinuous, Lipschitz continuous RE. Finally, we provide monotone equilibrium comparative statics results on the space of economies for some RE. Copyright Springer-Verlag Berlin Heidelberg 2013

Keywords: Recursive equilibrium; Stationary Markov equilibrium; Order-theoretic fixed point theory; Equilibrium computation; Monotone Comparative statics; D5; D62; E20; E6 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (8)

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DOI: 10.1007/s00199-012-0728-9

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