The Overlapping Generations Model (OLG) is a framework in economics used to analyze the behavior of different generations in an economy over time. It is characterized by the presence of multiple generations coexisting simultaneously, where each generation has its own preferences, constraints, and economic decisions. In this model, individuals live for two periods: they work and save in the first period and retire in the second, consuming their savings.
This structure allows economists to study the effects of public policies, such as social security or taxation, across different generations. The OLG model can highlight issues like intergenerational equity and the impact of demographic changes on economic growth. Mathematically, the model can be represented by the utility function of individuals and their budget constraints, leading to equilibrium conditions that describe the allocation of resources across generations.
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