How long does a generation last? Assessing the relationship between infinite and finite horizon dynamic models

Marco Guerrazzi

MPRA Paper from University Library of Munich, Germany

Abstract: This paper aims at assessing the temporal relationship that exists between the time reference of dynamic models with infinite and finite horizon. Specifically, comparing the optimal inter-temporal plans arising from an infinite-horizon model and a 2-period overlapping generations model in their stationary equilibria, I offer a straightforward way to determine the number of time periods of the former that may form a unit of time of the latter. In this way, I show that the theoretical length of a generation is an increasing function of the discount factor of the optimizing agent and I provide an economic rationale for such a relationship grounded on consumption smoothing.

Keywords: Infinite horizon; Overlapping generations; Consumption smoothing; Discount rate (search for similar items in EconPapers)
JEL-codes: C61 C68 E21 E30 (search for similar items in EconPapers)
Date: 2021-01-29
New Economics Papers: this item is included in nep-dge and nep-mac
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Related works:
Journal Article: How Long does a Generation Last? Assessing the Relationship Between Infinite and Finite Horizon Dynamic Models (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:105641

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