OG-Core lets you set initial government debt (initial_debt_ratio) and initial public capital (initial_Kg_ratio) from data. Initial household wealth cannot be set. The transition path hard-codes it in TPI.get_initial_SS_values:
initial_b = ss_b_sp1 * (B_ss / B0) # SS wealth profile, rescaled so aggregate B(0) = SS aggregate
If the initial population is close to its stationary age distribution (e.g., the US), the rescale factor is ≈1 and this is harmless. If it isn't, every initial household's wealth is scaled by a common factor no data supports — a windfall when the initial population is younger than the stationary one, a confiscation when it is older.
In OG-PHL the factor is 1.625 — every 2026 household starts with 63% more wealth than its steady-state counterpart. Households respond rationally (Euler errors ~1e-13): retirees consume the windfall in their remaining years, so aggregate consumption jumps 42% for a year, domestic investment falls to ~zero, and the consumption-tax surge pushes the baseline debt ratio ~10pp of GDP below target for decades.
Reform-minus-baseline results mostly difference this out (both paths share the initial condition). Baseline levels don't — validating transition paths against a country's actual fiscal program, debt-path analysis, or near-term projections all inherit the artifact.
The asymmetry is the point: OG-Core already treats initial government debt (initial_debt_ratio) and initial public capital (initial_Kg_ratio) as calibratable ratios to GDP — initial household wealth is the one initial stock that cannot be set. PR #1189 adds the missing sibling: initial_wealth_ratio, household wealth to GDP in the initial period, anchored inside the solver the way the debt ratio is (default 0.0 = disabled, current behavior unchanged). Calibrated for OG-PHL from the PWT capital stock, the IMF public capital stock, the BSP IIP foreign share, and the treasury's domestic debt share, it removes the artifact and puts the baseline fiscal paths on the government's own medium-term program (see the PR for the before/after).
One scope note: the parameter anchors the aggregate — the age profile of initial wealth still takes the steady-state shape, since the model has no wealth-by-age input to calibrate against. That residual is second-order next to the aggregate windfall, but a follow-up accepting a full initial wealth profile would close it.
OG-Core lets you set initial government debt (
initial_debt_ratio) and initial public capital (initial_Kg_ratio) from data. Initial household wealth cannot be set. The transition path hard-codes it inTPI.get_initial_SS_values:If the initial population is close to its stationary age distribution (e.g., the US), the rescale factor is ≈1 and this is harmless. If it isn't, every initial household's wealth is scaled by a common factor no data supports — a windfall when the initial population is younger than the stationary one, a confiscation when it is older.
In OG-PHL the factor is 1.625 — every 2026 household starts with 63% more wealth than its steady-state counterpart. Households respond rationally (Euler errors ~1e-13): retirees consume the windfall in their remaining years, so aggregate consumption jumps 42% for a year, domestic investment falls to ~zero, and the consumption-tax surge pushes the baseline debt ratio ~10pp of GDP below target for decades.
Reform-minus-baseline results mostly difference this out (both paths share the initial condition). Baseline levels don't — validating transition paths against a country's actual fiscal program, debt-path analysis, or near-term projections all inherit the artifact.
The asymmetry is the point: OG-Core already treats initial government debt (
initial_debt_ratio) and initial public capital (initial_Kg_ratio) as calibratable ratios to GDP — initial household wealth is the one initial stock that cannot be set. PR #1189 adds the missing sibling:initial_wealth_ratio, household wealth to GDP in the initial period, anchored inside the solver the way the debt ratio is (default 0.0 = disabled, current behavior unchanged). Calibrated for OG-PHL from the PWT capital stock, the IMF public capital stock, the BSP IIP foreign share, and the treasury's domestic debt share, it removes the artifact and puts the baseline fiscal paths on the government's own medium-term program (see the PR for the before/after).One scope note: the parameter anchors the aggregate — the age profile of initial wealth still takes the steady-state shape, since the model has no wealth-by-age input to calibrate against. That residual is second-order next to the aggregate windfall, but a follow-up accepting a full initial wealth profile would close it.