OverlappingGeneration(OLG)ModelinginGAMS.pdfVIP

DUKE UNIVERSITY ECONOMICS MA Overlapping Generation (OLG) Modeling in GAMS Econ 567 Computer Modeling, Project II, Spring 2013 Xiaolu Wang Ying Guo April 16, 2013 An OLG model is a type of economic model in which agents live a finite length of time long enough to overlap with at least one period of another agents life. We first developed a base model without tax, then add a tax, followed with tax-benefit, and extended with sensitivity analysis of free parameters. Abstract: An overlapping generations model, abbreviated as OLG model, is a type of economic model in which  agents live a finite length of time long enough to overlap with at least one period of another agents  life.  In this  report, we first  developed  a  base  model with  no tax  but  only  saving  and  capital  accumulation across different generations. Then we added a saving tax into the model. Finally we  added tax into the utility function to explore the externality of the tax. This OLG model is a standard  CGE application with GAMS.  Keywords: Computable General Equilibrium (CGE), Two‐Period Overlapping Generation (OLG) Model, Sensitivity  Analyses  Table of Contents 1.  Introduction  2  2.  Objectives of Our OLG modeling  3  3.  Basic Assumptions and Simple Explanations  3  4.  Computable General Equilibrium (CGE) Model development:  3  4.1 Symbol System 3  4.2 Equation System  4  4.3 Optimized Solutions from GAMS  4  4.4 Simple interpretations:  5  4.5 Extension: Sensitivity Analysis via reset free parameters  6  5.  Conclusions and Recommendations  10  6.  Acknowledgment  10  7.  Appendix  11    1    1. Introduction An overlapping generations model (OLG) is a type of economic model in which agents live a finite