New example based on model of Huggett (1996) – Wealth Distribution in Life-Cycle Economies. This example illustrates how to solve general equilibrium OLG models. The life-cycle problem itself involves exogenous earnings shocks, and endogenous asset choice. A large grid on assets is needed to allow for the model’s focus on inequality in the wealth distribution.

This is the first example showing how to deal with multiple general equilibrium conditions, here there are three: one for asset market clearance, one for accidental bequests, and one for government budget balance. It also shows how to use various commands related to inequality, and age-conditional moments.

For full details of the model see the original paper. Code for example.

Have also uploaded a replication of Huggett (1996).

Example also previews the new feature of computing the agents distribution using iteration on sparse matrices (simoptions.parallel=3). This is slower than the default iteration on the GPU (simoptions.parallel=2), but uses much less memory which was until now a bottleneck for this model and means this example can be run on a laptop (previously only ran on more powerful server). ‘Previews’ as the feature has not yet been rolled out for all relevant toolkit commands; will hopefully do so in coming weeks.