Heterogeneous Agent Overlapping Generations Framework with Endogenous Fiscal Multipliers: A Spectral Decomposition Approach to Intergenerational Welfare Redistribution

Abstract

This paper develops a novel heterogeneous-agent overlapping generations (HAOG) model augmented with endogenous fiscal multipliers to quantify intergenerational welfare redistribution under asymmetric macroeconomic shocks. Employing spectral decomposition techniques on stochastic dynamic general equilibrium systems, we isolate frequency-domain transmission channels through which discretionary fiscal policy propagates across demographic cohorts. The model is calibrated using harmonized panel data from 34 OECD economies spanning 1995–2023, incorporating time-varying tax wedges and age-stratified consumption elasticities. Our findings demonstrate that conventional aggregate fiscal multiplier estimates conceal substantial cross-cohort heterogeneity, with elderly household clusters exhibiting dampened transfer sensitivity relative to working-age quintiles. Policy simulations indicate that spectral-targeted expenditure sequencing reduces deadweight welfare loss by 18.4% relative to standard Keynesian benchmarks, offering a tractable framework for cohort-aware fiscal consolidation design.