Consider an overlapping generations economy in which agents live for two periods. Agents are identical within...
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Consider an overlapping generations economy in which agents live for two periods. Agents are identical within a generation and maximize max {In c₁t+ ß ln C2+1} C1,1,C2,t+1 Young agents pay a proportional tax on their labor income (wage) in order to finance social security transfers to old agents, B. In any period t there are Le young agents. Population grows at the rate n. Technology is represented by a th Cobb-Douglas production function: F(K, L) KaL-a. For simplicity, assume that there is no growth in technology, and that there is no depreciation. (a) State and solve the problem of a young agent. (b) Carefully obtain the equilibrium law of motion of the capital stock per-worker. Solve the steady state capital stock. (c) Obtain the steady state interest rates and wage rates as a function of the parameters of the problem. (d) If there is a benevolent social planner, what would be the resource constraint? Consider an overlapping generations economy in which agents live for two periods. Agents are identical within a generation and maximize max {In c₁t+ ß ln C2+1} C1,1,C2,t+1 Young agents pay a proportional tax on their labor income (wage) in order to finance social security transfers to old agents, B. In any period t there are Le young agents. Population grows at the rate n. Technology is represented by a th Cobb-Douglas production function: F(K, L) KaL-a. For simplicity, assume that there is no growth in technology, and that there is no depreciation. (a) State and solve the problem of a young agent. (b) Carefully obtain the equilibrium law of motion of the capital stock per-worker. Solve the steady state capital stock. (c) Obtain the steady state interest rates and wage rates as a function of the parameters of the problem. (d) If there is a benevolent social planner, what would be the resource constraint?
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Overlapping Generations Model with Capital Accumulation This exercise analyzes an overlapping generations model with capital accumulation and social s... View the full answer
Related Book For
Modeling Monetary Economies
ISBN: 978-1107145221
4th Edition
Authors: Bruce Champ, Scott Freeman, Joseph Haslag
Posted Date:
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