Computing minimal state space recursive equilibrium in OLG models with stochastic production

Jaime McGovern, Olivier F. Morand, Kevin Reffett

Research output: Contribution to journalArticle

4 Scopus citations

Abstract

Using order-theoretic methods, we derive sufficient conditions for the existence, characterization, and computation of minimal state space recursive equilibrium (RE), as well as Stationary Markov equilibrium (SME) for various classes of stochastic overlapping generations models. In contrast to previous work, our methods focus on constructive methods. Our existence results are obtained for models that include public policy (e.g., social security policies, transfers, taxes, etc), production nonconvexities, elastic labor supply, non-monotone income processes, and long-lived agents. We distinguish conditions under which there exist various subclasses of minimal state space RE, including bounded, monotone, non-monotone, semicontinuous, Lipschitz continuous RE. Finally, we provide monotone equilibrium comparative statics results on the space of economies for some RE.

Original languageEnglish (US)
Pages (from-to)623-674
Number of pages52
JournalEconomic Theory
Volume54
Issue number3
DOIs
StatePublished - Jan 1 2013

Keywords

  • Equilibrium computation
  • Monotone Comparative statics
  • Order-theoretic fixed point theory
  • Recursive equilibrium
  • Stationary Markov equilibrium

ASJC Scopus subject areas

  • Economics and Econometrics

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