Overlapping generations model: Difference between revisions

Revision as of 10:36, 27 November 2016

Revision as of 10:36, 27 November 2016

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*Individuals live for '''two''' periods; in the first period of life, they are referred to as the '''Young'''. In the second period of life, they are referred to as the '''Old'''.

*A number of individuals are born in every period. ''N'' ^t_t denotes the number of individuals born in period t.

*''N'' <supmath>N^{t-1}_t</sup><sub>t</submath> denotes the number of old people in period t. Since the economy begins in period 1, in period 1 there is a group of people who are already old. They are referred to as the ''initial old.'' The number of them can be denoted as ''N''_''0'' .

*The size of the initial old generation is normalized to 1: ''N''⁰₀ = 1.

*People do not die early, so ''N''^t_t = ''N''^t_t+1.