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A Production OLG Economy with Heterogeneous Agents Let us consider an infinitely lived perfectly competitive overlapping generations economy endowed with two types of two-period lived

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A Production OLG Economy with Heterogeneous Agents Let us consider an infinitely lived perfectly competitive overlapping generations economy endowed with two types of two-period lived households namely A and B and one perfectly competitive firm. At every time t, a new generation of size N, is born which is 1 + it times the sue of the previous with R E (-1, +0). Each generation is endowed with a fraction A E (0,1) of type A households and a fraction 1 - 1 of type B households. The lifetime preferences at time I of the representative household A are described by the following logarithmic utility function where a, 8. 8 3 0 denote preference parameters. The Iratime preferences of the representative type 8 household are described by the following Leontief utility function: where y >: 0 is a preference parameter. The consumption commodity is perishable and is produced at every time c by a single perfectly competitive firm using labour: where Y, denotes the aggregate output level, Ly stands for the aggregate labour input defined as the aggregate amount of time allocated to work, Z >: 0 is a productivity term and = = (0,1). At every time , each household A in the first-period of life or period 1 is endowed with & unitis) of time heyshe can alocates between leisure (, and work er at the real wage rate wp consumes cit unit(s] of the produced commodity and lends of > ( or borrows of 0 or borrows so

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