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Computational Methods for the Study of Dynamic Economies$
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Ramon Marimon and Andrew Scott

Print publication date: 2001

Print ISBN-13: 9780199248278

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0199248273.001.0001

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Computation of Equilibria in Heterogeneous‐Agent Models

Computation of Equilibria in Heterogeneous‐Agent Models

Chapter:
(p.238) 11 Computation of Equilibria in Heterogeneous‐Agent Models
Source:
Computational Methods for the Study of Dynamic Economies
Author(s):

José‐Víctor Ríos‐Rull

Publisher:
Oxford University Press
DOI:10.1093/0199248273.003.0011

There are many questions in economics for which heterogeneous‐agent dynamic models (i.e. models populated by agents that are different from each other) have to be used to provide answers. The first such model presented is one with infinitely lived agents subject to uninsurable idiosyncratic shocks to earnings; a very simple version of such a model is used to address the distribution of wealth under both a steady state and a non‐steady state situation. The second type of model presented is the overlapping generations model, which represents the situation where every year some agents die and new agents are born; such models are embodied in a neoclassical growth model structure with capital accumulation. Once again, both steady state and non‐steady state situations are considered. Finishes with a section on dynamic voting models; these are models that endogenously generate government policies as part of a Markov equilibrium, and are starting to be used to study positive policy issues such as redistributional policies. All the models are posed in such a way that they are susceptible to computation, and in all of them, the different agents are central in the sense that the question that the models are used to answer requires heterogeneity.

Keywords:   dynamic economics models, dynamic voting models, heterogeneous‐agent dynamic models, infinitely lived models, macroeconomics, Markov equilibria, neoclassical growth models, overlapping generations models, wealth distribution models

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