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Danish Ministry of Trade and Industry

By Tobias N. Rasmussen and Thomas F. Rutherford


This paper provides an introduction to numerical simulation of overlapping generations models with perfect foresight and finite lifetimes. The paper illustrates the advantages of the complementarity framework for this class of problems. Three GAMS programs demonstrate how these models can be formulated in applied research. Issues addressed in the paper include calibration to base year data, representation of international trade, bequests, government tax and expenditure policies, and labor/leisure choice with endogenous retirement. We wish to thank Morten Lau and Renger van Nieuwkoop for helpful suggestions on earlier drafts of Overlapping generations (OLG) models with consistent expectations and finite lifetimes have become a standard tool for applied policy analysis since the seminal contribution of Auerbach and Kotlikoff [1987]. A number of researchers have subsequently adopted the AK-OLG framework for applied work (Altig and Carlstrom [1999], Broer et al. [1994]

Year: 2001
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