A necessary feature for equilibrium is that beliefs about the behavior of other agents are rational and individuals maximize. We argue that in stationary OLG environments this implies that any future generation in the same situation as the initial generation must do as well as the initial generation did in that situation. We conclude that the existing equilibrium concepts in the literature do n...

Aiyagari (1992) shows that equilibria are nonoptimal for an overlapping generations economy if and only if Walras’ Law fails. We demonstrate that this failure represents an earnings opportunity exploitable by unsecured debt issue. When unsecured debt is issued, Walras’ Law holds. JEL Classification: D5, D6, D9

Trade changes incentives to protect an open-access natural resource. In an OLG setting, the capital asset market transfers policy-induced future gains and losses to the current asset owner. The asset market creates incentives for agents currently alive to protect the natural resource under autarchy. Trade reverses these incentives. In a dynamic political economy, agents without bequest motives ...

We construct a stochastic overlapping generations model in which households of di¤erent ages are subject to aggregate shocks that a¤ect both wages and asset prices. We use a realistically calibrated version of the model to assess the distributional consequences of severe recessions. More speci…cally, within the context of this model we ask whether young people can be better o¤ if they become ec...

We prove the existence of general equilibrium for continuous-time overlappinggenerations models. Previous theorems exclude all non-linear C.E.S. and von Neumann Morgenstern preferences and exclude production. Our primitive assumptions are satisfied by such preferences and by all Markovian production technologies satisfying Bewley's assumptions for Arrow Debreu models provided that storage is po...

The OLG model of Allais and Samuelson retains the methodological assumptions of agent optimization and market clearing from the Arrow-Debreu model, yet its equilibrium set has different properties: Pareto inefficiency, indeterminacy, positive valuation of money, and a golden rule equilibrium in which the rate of interest is equal to population growth (independent of impatience). These propertie...

We reappraise the robustness of sunspot effects in overlapping-generations models. Azariadis’s wellknown example economies have stationary, deterministic fundamentals (preferences, technologies, and endowments), yet sunspots affect multiple equilibria. And those equilibria are robust to common perturbations of underlying fundamentals. However, we find that judiciously splitting each of Azariadi...

Recent theoretical work shows that folk theorems can be developed for infinite overlapping generations games. Cooperation in such games can be sustained as a Nash equilibrium. Besides the efficient cooperative equilibrium there is also the inefficient non-cooperative equilibrium. This paper investigates experimentally whether cooperation actually occurs in a simple overlapping generations game....

We consider a stochastic overlapping generations model for a continuum of individuals with finite lives in presence of a financial market. In this paper, agent’s heterogeneity is given by the dates of birth of the households, on the contrary to standard models, in which each agent has his own aversion coefficient on his utility function. By means of the martingale arguments, we compute the agen...

The paper studies the dynamic macroeconomic and welfare effects of tax policy in the context of an overlapping-generations model of the Yaari-Blanchard type for a closed economy. The model is extended to allow for endogenous labor supply and three tax instruments—namely, a capital tax, labor income tax, and consumption tax. It is shown that labor taxes increase welfare of old generations wherea...