Generational Policy and Aging in Closed and Open Dynamic General Equilibrium Models

Hans Fehr (), Sabine Jokisch, Manuel Kallweit, Fabian Kindermann and Laurence Kotlikoff

Chapter Chapter 27 in Handbook of Computable General Equilibrium Modeling, 2013, vol. 1, pp 1719-1800 from Elsevier

Abstract: This chapter examines the micro- and macroeconomic effects of generational policies using closed and open general equilibrium dynamic life-cycle models. The models illustrate the broad array of demographic, economic, and policy issues that can be simultaneously incorporated within today’s computable models of economic growth. The list includes country-specific tax, spending, social security, healthcare policy, deficit policy age-cohort- and country-specific mortality, age-specific fertility, age-specific morbidity, lifespan uncertainty, age- and skill-specific emigration and immigration, earnings inequality driven by skill differences and idiosyncratic labor earnings uncertainty, capital adjustment costs, international trade, international capital flows, trade specialization, and trade policy. The chapter begins with the benchmark dynamic overlapping generations (OLG) simulation model of Auerbach and Kotlikoff (1987), discusses various advances in OLG simulation modeling and then presents two applications. The first is a closed-economy model, calibrated for Germany, that features idiosyncratic labor earnings uncertainty and changes in demographics. After running the model through a number of policy simulations, we turn to an open-economy model, featuring five regions (the US, Europe, Japan and other Asian countries, China, and India) producing six goods, some of which are traded. We use this model to quantify how economies will transition over time, how wage inequality will evolve, how tax rates will change in light of societal aging and how various unilateral and multilateral policy reforms impact the six regions.

Keywords: Population aging; OLG model; idiosyncratic shocks; international spillovers; pension and tax policies (search for similar items in EconPapers)
JEL-codes: C68 F0 H55 J11 J20 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/B9780444595683000274
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:hacchp:v:1:y:2013:i:c:p:1719-1800

DOI: 10.1016/B978-0-444-59568-3.00027-4

Access Statistics for this chapter

More chapters in Handbook of Computable General Equilibrium Modeling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().