Do the implications for business cycle issues change when we switch from studying infinitely-lived, representative-agent models to more sophisticated demographic structures with finitely lived agents? This article addresses that question by using a large, overlapping-generations model that is calibrated to U.S. demographic properties, microeconomic evidence, and National Income and Product Accounts. The finding is that the answers obtained are basically the same for the two kinds of models. The article also explores the relative volatility of hours across age groups, an issue that cannot be addressed by using the infinitely-lived, representative-agent abstraction.
Bibliographical noteFunding Information:
Acknowledgements. Parts of this research have been funded by the National Science Foundation. Some of the material in this article is from the second chapter of my dissertation. The help and patience of Ed Prescott and Finn Kydland are acknowledged. Thanks also go to the following persons: the members of my dissertation committee-s-Neil Wallace, Jan Werner, Denis Ahlburg, Ken Wolpin, and Tim Kehoe; Roger Lagunoff; Pat Kehoe; Randy Wright; Stan Zin and two anonymous referees. The views expressed herein are those of the author and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System.