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The Overlapping Generations Model and the Pension System

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This note presents the simplest overlapping generations model. The model is due to Diamond (1965), who built on earlier work by Samuelson (1958). Overlapping generations models capture the fact that individuals do not live forever, but die at some point and thus have finite life-cycles. Overlapping generations models are especially useful for analysing the macro-economic effects of different pension systems.

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