Open Access

Christian Scharrer

• My cumulative dissertation consists of three essays about dynamic stochastic general equilibrium (DSGE) models with overlapping generations. In particular, all three models in these essays have in common that they feature a large-scale overlapping generations structure, which allows to introduce heterogeneous households in the economic analysis. The agents, therefore, differ by their age and, depending on the respective essay and the associated research questions, their age-specific productivity and their consumer type. With respect to the associated research questions in my thesis, my dissertation consists of the following essays and is structured as follows: My first paper with the title "Aging, the Great Moderation and Business-Cycle Volatility in a Life-Cycle Model", which I present in Chapter 2, is a joint work with Burkhard Heer (University of Augsburg) and Stefan Rohrbacher (University of Augsburg). There, we study the impacts of the demographic transition and the downwardMy cumulative dissertation consists of three essays about dynamic stochastic general equilibrium (DSGE) models with overlapping generations. In particular, all three models in these essays have in common that they feature a large-scale overlapping generations structure, which allows to introduce heterogeneous households in the economic analysis. The agents, therefore, differ by their age and, depending on the respective essay and the associated research questions, their age-specific productivity and their consumer type. With respect to the associated research questions in my thesis, my dissertation consists of the following essays and is structured as follows: My first paper with the title "Aging, the Great Moderation and Business-Cycle Volatility in a Life-Cycle Model", which I present in Chapter 2, is a joint work with Burkhard Heer (University of Augsburg) and Stefan Rohrbacher (University of Augsburg). There, we study the impacts of the demographic transition and the downward shift of age-specific labor supply volatilities on the volatility of aggregate output during the Great Moderation, which describes the pronounced decline in the volatility of key macroeonomic variables, like the average growth rate of real gross domestic product (GDP), since the mid-1980s. We find that the aforementioned downward shift of the age-specific labor supply volatility curve is able to explain a reduction of output volatility by 23%. In contrast, the influence of changes in the age-composition itself is rather negligible since demographic composition effects almost cancel each other out at the aggregate level. This paper was published in the journal "Macroeconomic Dynamics" in the year 2017. Moreover, my second essay with the title "the Age-Specific Burdens of Short-Run Fluctuations in Government Spending" in Chapter 3 is also a joint work with Burkhard Heer and was published in the "Journal of Economic Dynamics and Control" in the year 2018. In this paper, we investigate the effects of short-run fluctuations of government spending and its financing form on the distribution of income and wealth between cohorts and the associated impacts on individual welfare over the life cycle. First, we show that an unexpected increase of one standard deviation in government consumption results in a slight decline of income and wealth inequality. Second, and contrary to the conventional wisdom that the financing of government expenditures by debt rather than taxes especially burdens young generations, we find that debt-financing also harms Ricardian retirees. If government spending shocks also result in endogenous adjustments of the price of capital, then this channel induces more pronounced fluctuations in their lifetime utility in contrast to tax-financed changes in government spending. Chapter 4 contains the current version of my working paper with the title "the Effects of Financing Rules in Pay-As-You-Go Pension Systems on the Life and the Business Cycle", where I am the single author. In this essay, I investigate the impacts of financing rules for potential financial surpluses in pay-as-you-go pension systems on the business cycle and study the resulting effects on the consumption smoothing behavior of households over the life cycle. The results in this paper point out that the financing form has strong and very different age-specific effects on the consumption smoothing behavior over the life cycle. Moreover, I show that the impacts of higher fluctuations of aggregate variables on the volatility of individual lifetime utilities can rather be negligible. In Chapter 5, I summarize the most important findings of the presented essays in my thesis, which are also intensively discussed in the respective section for each paper. Moreover, I also point to directions for further research in the final conclusion.…