《Notes on the OLG Model》中学生教育文学丛书.pdfVIP

1 Notes on the OLG Model 1.1 Introduction The overlapping generations (OLG) model, introduced by Sameulson (1958), is a dynamic economic model with many interesting properties. It contains agents who are born at di®erent dates and have ¯nite lifetimes, even though the economy goes on forever. This induces a natural heterogeneity across individuals at a point in time, as well as nontrivial life-cycle considerations for a given individual across time. These features of the model can also generate di®erences from models where there is a ¯nite set of time periods and agents, or from models where there is an in¯nite number of time periods but agents live forever. In particular, competitive equilibria in the OLG model may not to be Pareto optimal. A closely related feature of the model is that it has a role for ¯at money. This means we can use OLG models to address a variety of substantive issues in monetary economics. 1.2 The Basic Model Suppose that t = 1; 2; : : :, and that at every date t there is born a new generation Gt of individuals who live for two periods. More realistic (longer) lifetimes can be studied, but two periods is the simplest case where the generations overlap. There is also a generation G0 around at t = 1 who only live for one period, called the \initial old. For now, every generation consists of a [0; 1] continuum of homogeneous agents. Let ct1 and ct2 denote consumption of an individual from G , t ¸ 1, in the 1st and 2nd periods of t life, and let e1 and e2 denote his (time-invariant) endowments in the 1st and 2nd periods of life. His utility function u(ct1 ; ct2) is strictly increasing and quasi-concave. Members of generation G0 consume only c02 and are endowed