Most macroeconomic analyses rely on either an infinite horizon model (in which people care about their descendants as much as they care about themselves) or an overlapping generations model (in which people don't care about their descendants at all). But if we are interested in fiscal policies...

This paper shows the macroeconomic and welfare implications of an aging population in the United States, using an overlapping-generations model with heterogeneous households. The model uses three population projections in Social Security Administration (2003), and generates economies as...

This paper describes a stochastic overlapping generations (OLG) model with heterogeneous agents, which is one of five models used at the Congressional Budget Office for recent fiscal policy analyses. In this model economy, households are heterogeneous with respect to their age, wealth holding,...

This paper extends the heterogeneous agent overlapping generations model with bequests in Nishiyama (2000) by adding two-way intergenerational altruism and inter vivos transfers. Calibrating the model to the U.S. economy, the paper measures time preference and intergenerational altruism...

Several important empirical studies (for example, Altonji, Hayashi, and Kotlikoff, 1992, 1996, 1997) have found that households are not altruistically linked in a way consistent with the standard Ricardian model, as put forward by Barro (1974). We built a two-sided altruistic-linkage model in...

This paper explores the effects of a simple policy change—a 10 percent tax cut—to shed light on the different models CBO uses to examine the macroeconomic effects of policy changes. Most of the models predict that such a simple tax cut will increase GDP and therefore that the revenue loss...

The economic literature shows that privatizing Social Security can improve labor supply incentives, but it can also reduce risk sharing when households face uninsurable risks. We simulate a stylized 50-percent privatization with transaction costs financed by consumption taxes and examined its...

This paper shows the macroeconomic and welfare implications of an aging population in the United States, using an overlapping-generations model with heterogeneous households. The model uses three population projections in Social Security Administration (2003), and generates economies as...