Concluding Remarks

Sebastian Rausch

Chapter 5 in Macroeconomic Consequences of Demographic Change, 2009, pp 125-127 from Springer

Abstract: Abstract This book presents a new computational method to efficiently solve large-scale Auerbach-Kotlikoff OLG models that are infeasible for simultaneous solution methods. The proposed decomposition algorithm is based on the solution of a sequence of nonlinear complementarity problems. The main idea is to approximate equilibria of an OLG economy by solving a sequence of representative agent (Ramsey optimal growth) problems. It has been demonstrated that this algorithm can be used to solve high-dimensional OLG models that comprise a large number of sectors and regions and a rich household side, including a large number of heterogeneous households and a variety of household-specific effects. Given the limitations of integrated approaches, the new method thus significantly increases the range of economic questions that can be investigated with these models, providing a valuable addition to the toolbox of applied general equilibrium modelers. One important advantage of the decomposition algorithm presented here is that it facilitates the development of large-scale OLG models designed to investigate in-depth the distributional consequences of economic policy along an intra- and intergenerational dimension.

Keywords: Pension System; Nonlinear Complementarity Problem; Perfect Competition; Household Behavior; Heterogeneous Household (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:spr:lnechp:978-3-642-00146-8_5

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DOI: 10.1007/978-3-642-00146-8_5

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