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Macroeconomic Theory$
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Jean-Pascal Benassy

Print publication date: 2011

Print ISBN-13: 9780195387711

Published to Oxford Scholarship Online: April 2015

DOI: 10.1093/acprof:osobl/9780195387711.001.0001

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Overlapping Generations

Overlapping Generations

Chapter:
(p.161) 8 Overlapping Generations
Source:
Macroeconomic Theory
Author(s):

Jean-Pascal Bénassy

Publisher:
Oxford University Press
DOI:10.1093/acprof:osobl/9780195387711.003.0008

This chapter presents a discrete time model, the overlapping generations (OLG) model. It starts by presenting the most classic OLG model, wherein each family lives over two periods and overlaps only with the previous family (when young) and the next one (when old). It defines the market equilibrium of this economy, and also reveals that a few equilibria can be Pareto dominated. Additionally, it evaluates the important issue of pensions. The chapter then discusses the two classic pension systems: the fully funded system and the pay-as-you-go system. Lastly, it investigates the dynamics of the economy when agents can accumulate capital and government debt.

Keywords:   overlapping generations model, Pareto dominated, pension systems, government debt, capital, fully funded system, pay-as-you-go system

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