Constraints in perfect-foresight models: The case of old-age savings and public pensions

The solution of discrete-time perfect-foresight models with constrained state variables differs considerably from the solution of models without constraints. In this paper this is worked out for a simple model of decision making on public pensions.

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Bibliographic Details
Published in:Economics letters 1995, Vol.48 (2), p.129-137
Main Authors: Meijdam, Lex, Verhoeven, Marijn
Format: Article
Language:English
Subjects:
Constraints
Dynamics
Old age
Pensions
Perfect foresight
Public pensions
Savings
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Description
Summary:The solution of discrete-time perfect-foresight models with constrained state variables differs considerably from the solution of models without constraints. In this paper this is worked out for a simple model of decision making on public pensions.
ISSN:0165-1765
1873-7374
DOI:10.1016/0165-1765(94)00604-Z