A Life-Cycle General Equilibrium Simulation Model with Continuous Income Distribution An Application to an Aging Japan
Chapters 3 through 6 incorporated plural representative households with unequal incomes in each cohort, and addressed the problem of intragenerational redistribution. However, the changes in the variance of lifetime income distribution were not strictly dealt with. This chapter introduces numerous representative households with continuous income distribution into each cohort. This permits us to rigorously analyze changes in variance. When the logarithm of earnings ability follows a normal distribution, a simulation can easily handle the diverse abilities of labor supply. This chapter examines the general equilibrium effects of changes in the variance of income distribution on capital accumulation and social welfare.
KeywordsSocial Welfare Labor Supply Income Distribution Labor Income Social Welfare Function
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