Computation of equilibria in OLG models with many heterogeneous households

Sebastian Rausch and Thomas F. Rutherford

This paper develops a decomposition algorithm by which a market economy with many households may be solved through the computation of equilibria for a sequence of representative agent economies. The paper examines local and global convergence properties of the sequential recalibration (SR) algorithm. SR is then demonstrated to efficiently solve Auerbach- Kotlikoff OLG models with a large number of heterogeneous households. We approximate equilibria in OLG models by solving a sequence of related Ramsey optimal growth problems. This approach can provide improvements in both efficiency and robustness as compared with simultaneous solution methods.

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Year of publication:	[2008]
Authors:	Rausch, Sebastian ; Rutherford, Thomas F.
Publisher:	Zurich : CER-ETH - Center of Economic Research at ETH Zurich
Subject:	Computable general equilibrium \| Overlapping generations \| Microsimulation \| Sequential recalibration \| CGE-Modell \| CGE model \| Allgemeines Gleichgewicht \| General equilibrium \| Dekompositionsverfahren \| Decomposition method \| Overlapping Generations \| Theorie \| Theory