Compute capital gains using FIFO model for FHorz agents

OLGModel14.m

@@ -129,12 +129,18 @@
 % Some initial values/guesses for variables that will be determined in general eqm
 Params.pension=0.4; % Initial guess (this will be determined in general eqm)
 Params.w=1; % Wages, determines (household) labor supply and (firm) demand
-Params.AccidentBeq=0.02; % Accidental bequests (this is the lump sum transfer)
+Params.AccidentBeq=0.02; % Accidental bequests (this is the lump sum transfer received after capital gains taxes and dilution due to population growth, but before estate taxes)
 Params.G=0.1; % Government expenditure
 Params.firmbeta=1/(1+Params.r/(1-Params.tau_cg)); % 1/(1+r) but returns net of capital gains tax
 Params.D=0.2; % Dividends rate expected/received by households
-Params.P0=1;
-Params.Lhscale=0.21; % Scaling the household labor supply
+Params.P0=2.18; % This price is not 1 because we need price for older and younger agents to balance
+Params.Lhscale=0.22; % Scaling the household labor supply
+
+% We build a simple model of acquiring and disposing of stock over a lifetime
+Params.S_agej_first=20; % the age at which we start acquiring more stock than noise
+Params.S_agej_peak_first=Params.Jr-1; % the age of first peak acquisition
+Params.S_agej_peak_last=Params.Jr+5; % the age of last peak acquisition
+Params.S_agej_last=Params.J-5; % the age of final disposal
 
 %% Grids for household
 
@@ -184,8 +190,8 @@
 % For households
 DiscountFactorParamNames.household={'beta','sj'};
 % Notice we use 'OLGModel14_HouseholdReturnFn'
-ReturnFn.household=@(h,sprime,s,z,e,sigma,psi,eta,agej,Jr,J,pension,w,P0,D,kappa_j,warmglow1,warmglow2,AccidentBeq,r,tau_l,tau_d,tau_cg)...
-    OLGModel14_HouseholdReturnFn(h,sprime,s,z,e,sigma,psi,eta,agej,Jr,J,pension,w,P0,D,kappa_j,warmglow1,warmglow2,AccidentBeq,r,tau_l,tau_d,tau_cg);
+ReturnFn.household=@(h,sprime,s,z,e,sigma,psi,eta,agej,Jr,J,pension,w,P0,D,kappa_j,warmglow1,warmglow2,AccidentBeq,r,tau_l,tau_d,tau_cg,S_agej_first,S_agej_peak_first,S_agej_peak_last,S_agej_last)...
+    OLGModel14_HouseholdReturnFn(h,sprime,s,z,e,sigma,psi,eta,agej,Jr,J,pension,w,P0,D,kappa_j,warmglow1,warmglow2,AccidentBeq,r,tau_l,tau_d,tau_cg,S_agej_first,S_agej_peak_first,S_agej_peak_last,S_agej_last);
 
 % For firms
 DiscountFactorParamNames.firm={'firmbeta'};
@@ -224,7 +230,7 @@
 StationaryDist=StationaryDist_Case1_FHorz_PType(jequaloneDist,AgeWeightsParamNames,PTypeDistParamNames,Policy,n_d,n_a,n_z,N_j,Names_i,pi_z,Params,simoptions);
 
 %% General eqm variables
-GEPriceParamNames={'pension','AccidentBeq','G','w','firmbeta','D','P0'}; 
+GEPriceParamNames={'pension','G','w','firmbeta','D','P0'}; 
 % We don't need P
 % We can get P from the equation that defines r as the return to the mutual fund
 % 1+r = (P0 +(1-tau_d)D - tau_cg(P0-P))/Plag
@@ -243,8 +249,28 @@
 FnsToEvaluate.S.household = @(h,sprime,s,z,e) s; % Aggregate share holdings
 FnsToEvaluate.PensionSpending.household = @(h,sprime,s,z,e,pension,agej,Jr) (agej>=Jr)*pension; % Total spending on pensions
 FnsToEvaluate.PayrollTaxRevenue.household = @(h,sprime,s,z,e,agej,Jr,tau_l,w,kappa_j,Lhscale) (agej<Jr)*tau_l*w*kappa_j*exp(z+e)*Lhscale*h; % Total spending on pensions
-FnsToEvaluate.AccidentalBeqLeft.household = @(h,sprime,s,z,e,sj) sprime*(1-sj); % Accidental bequests left by people who die
-FnsToEvaluate.CapitalGainsTaxRevenue.household = @(h,sprime,s,z,e,tau_cg,P0,D,tau_d,r) tau_cg*(P0-(((1-tau_cg)*P0 + (1-tau_d)*D)/(1+r-tau_cg)))*s; % tau_cg*(P0-Plag)*s, but substitute P=Plag, and then substitute for P
+FnsToEvaluate.AccidentalBeq.household = @(h,sprime,s,z,e,agej,sj,n,P0,r,tau_cg,S_agej_first,S_agej_peak_first,S_agej_peak_last,S_agej_last) ... % Accidental bequests left by people who die, (possibly after estate taxes) and dilution to dependents
+    (sprime-OLGModel14_HouseholdCapitalGainsFn(h,sprime,s,z,e,agej,1,P0,0,r,tau_cg,S_agej_first,S_agej_peak_first,S_agej_peak_last,S_agej_last))*(1-sj)/(1+n);
+FnsToEvaluate.CapitalGainsTaxRevenue.household = @(h,sprime,s,z,e,agej,P0,AccidentBeq,r,tau_cg,S_agej_first,S_agej_peak_first,S_agej_peak_last,S_agej_last) OLGModel14_HouseholdCapitalGainsFn(h,sprime,s,z,e,agej,0,P0,AccidentBeq,r,tau_cg,S_agej_first,S_agej_peak_first,S_agej_peak_last,S_agej_last);
+
+AgeConditionalStats=LifeCycleProfiles_FHorz_Case1_PType(StationaryDist,Policy,FnsToEvaluate.S,Params,n_d,n_a,n_z,N_j,Names_i,d_grid,a_grid,z_grid,simoptions);
+Params.S_agej_first=max(find(AgeConditionalStats.household.Mean>0.1,1,'first')-1,1);
+Params.S_agej_last=min(find(AgeConditionalStats.household.Mean>0.5,1,'last')+1,length(AgeConditionalStats.household.Mean)); % warmglow creates extra long tail we want to ignore
+[~,S_agej_peak]=max(AgeConditionalStats.household.Mean);
+S_peak_inflection_value=0.95*AgeConditionalStats.household.Mean(S_agej_peak);
+for S_agej_peak_first=S_agej_peak:-1:Params.S_agej_first
+    if AgeConditionalStats.household.Mean(S_agej_peak_first)<S_peak_inflection_value
+        break
+    end
+end
+Params.S_agej_peak_first=S_agej_peak_first;
+for S_agej_peak_last=S_agej_peak:Params.S_agej_last
+    if AgeConditionalStats.household.Mean(S_agej_peak_last)<S_peak_inflection_value
+        break
+    end
+end
+Params.S_agej_peak_last=S_agej_peak_last;
+
 % From firms
 FnsToEvaluate.Output.firm = @(d,kprime,k,z,w,alpha_k,alpha_l) z*(k^alpha_k)*((w/(alpha_l*z*(k^alpha_k)))^(1/(alpha_l-1)))^alpha_l; % Production function z*(k^alpha_k)*(l^alpha_l) (substituting for l)
 FnsToEvaluate.L_f.firm = @(d,kprime,k,z,w,alpha_k,alpha_l) (w/(alpha_l*z*(k^alpha_k)))^(1/(alpha_l-1)); % (effective units of) labor demanded by firm
@@ -257,7 +283,7 @@
 GeneralEqmEqns.sharemarket = @(S) S-1; % mass of all shares equals one
 GeneralEqmEqns.labormarket = @(L_h,L_f) L_h-L_f; % labor supply of households equals labor demand of firms
 GeneralEqmEqns.pensions = @(PensionSpending,PayrollTaxRevenue) PensionSpending-PayrollTaxRevenue; % Retirement benefits equal Payroll tax revenue: pension*fractionretired-tau*w*H
-GeneralEqmEqns.bequests = @(AccidentalBeqLeft,AccidentBeq,n) AccidentalBeqLeft/(1+n)-AccidentBeq; % Accidental bequests received equal accidental bequests left
+% GeneralEqmEqns.bequests = @(AccidentalBeqLeft,AccidentBeq,n) AccidentalBeqLeft/(1+n)-AccidentBeq; % Accidental bequests received equal accidental bequests left
 GeneralEqmEqns.govbudget = @(G,tau_d,D,CapitalGainsTaxRevenue,CorpTaxRevenue) G-tau_d*D-CapitalGainsTaxRevenue-CorpTaxRevenue; % G is equal to the target, GdivYtarget*Y
 GeneralEqmEqns.firmdiscounting = @(firmbeta,r,tau_cg) firmbeta-1/(1+r/(1-tau_cg)); % Firms discount rate is related to market return rate
 GeneralEqmEqns.dividends = @(D,DividendPaid) D-DividendPaid; % That the dividend households receive equals that which firms give
@@ -280,6 +306,8 @@
 fprintf('Check: ShareIssuance GE condition \n')
 Params.P0-((((1-Params.tau_cg)*Params.P0 + (1-Params.tau_d)*Params.D)/(1+Params.r-Params.tau_cg))-AggVars.S.Mean)
 
+% Update estimate to value from initial stationary distribution
+Params.AccidentBeq=AggVars.AccidentalBeq.household.Mean;
 
 %% Solve for the General Equilibrium
 % heteroagentoptions.fminalgo=4 % CMA-ES algorithm 
@@ -289,7 +317,7 @@
 % p_eqm contains the general equilibrium parameter values
 % Put this into Params so we can calculate things about the initial equilibrium
 Params.pension=p_eqm.pension;
-Params.AccidentBeq=p_eqm.AccidentBeq;
+% Params.AccidentBeq=p_eqm.AccidentBeq;
 Params.G=p_eqm.G;
 Params.w=p_eqm.w;
 Params.firmbeta=p_eqm.firmbeta;
@@ -314,8 +342,8 @@
 %% Calculate some aggregates and print findings about them
 
 % Add consumption to the FnsToEvaluate
-FnsToEvaluate.Consumption.household=@(h,sprime,s,z,e,agej,Jr,pension,w,P0,D,kappa_j,AccidentBeq,r,tau_l,tau_d,tau_cg) OLGModel14_HouseholdConsumptionFn(h,sprime,s,z,e,agej,Jr,pension,w,P0,D,kappa_j,AccidentBeq,r,tau_l,tau_d,tau_cg);
-FnsToEvaluate.Income.household=@(h,sprime,s,z,e,agej,Jr,pension,w,P0,D,kappa_j,AccidentBeq,r,tau_l,tau_d,tau_cg) OLGModel14_HouseholdIncomeFn(h,sprime,s,z,e,agej,Jr,pension,w,P0,D,kappa_j,AccidentBeq,r,tau_l,tau_d,tau_cg);
+FnsToEvaluate.Consumption.household=@(h,sprime,s,z,e,agej,Jr,pension,w,P0,D,kappa_j,AccidentBeq,r,tau_l,tau_d,tau_cg,S_agej_first,S_agej_peak_first,S_agej_peak_last,S_agej_last) OLGModel14_HouseholdConsumptionFn(h,sprime,s,z,e,agej,Jr,pension,w,P0,D,kappa_j,AccidentBeq,r,tau_l,tau_d,tau_cg,S_agej_first,S_agej_peak_first,S_agej_peak_last,S_agej_last);
+FnsToEvaluate.Income.household=@(h,sprime,s,z,e,agej,Jr,pension,w,P0,D,kappa_j,AccidentBeq,r,tau_l,tau_d,tau_cg,S_agej_first,S_agej_peak_first,S_agej_peak_last,S_agej_last) OLGModel14_HouseholdIncomeFn(h,sprime,s,z,e,agej,Jr,pension,w,P0,D,kappa_j,AccidentBeq,r,tau_l,tau_d,tau_cg,S_agej_first,S_agej_peak_first,S_agej_peak_last,S_agej_last);
 
 AggVars=EvalFnOnAgentDist_AggVars_FHorz_Case1_PType(StationaryDist, Policy, FnsToEvaluate, Params, n_d, n_a, n_z,N_j, Names_i, d_grid, a_grid, z_grid,simoptions);
 
@@ -335,7 +363,7 @@
 fprintf('Output: Y=%8.2f \n',AggVars.Output.Mean)
 fprintf('Aggregate TFP: Y=%8.2f \n',AggregateTFP)
 fprintf('Capital-Output ratio (firm side): K/Y=%8.2f \n',AggVars.K.Mean/Y)
-fprintf('Total asset value (HH side): P*S=%8.2f \n',P*AggVars.S.Mean)
+fprintf('Total asset value (HH side): P*S=%8.2f; n.b.: P*S/P0=%8.2f \n',P*AggVars.S.Mean,P*AggVars.S.Mean/Params.P0)
 fprintf('Total firm value (firm side): Value of firm=%8.2f \n',TotalValueOfFirms)
 fprintf('Consumption-Output ratio: C/Y=%8.2f \n',AggVars.Consumption.Mean/Y)
 fprintf('Government-to-Output ratio: G/Y=%8.2f \n', Params.G/Y)

OLGModel14_HouseholdCapitalGainsFn.m

@@ -0,0 +1,41 @@
+function cg=OLGModel14_HouseholdCapitalGainsFn(h,sprime,s,z,e,agej,at_death,P0,AccidentBeq,r,tau_cg,S_agej_first,S_agej_peak_first,S_agej_peak_last,S_agej_last)
+% Replace assets with 'share holdings'
+% Get rid of progressive taxes
+% Add Lhnormalize
+
+% We can get P from the equation that defines r as the return to the mutual fund
+% 1+r = (P0 +(1-tau_d)D - tau_cg(P0-P))/Plag
+% We are looking at stationary general eqm, so
+% Plag=P;
+% And thus we have P=((1-tau_cg)*P0 + (1-tau_d)*D)/(1+r-tau_cg);
+
+if sprime>=s
+    agej_bought=agej;
+    cg=0; % We are holding or buying, so no capital gains
+else
+    if agej<=S_agej_peak_first
+        agej_bought=agej-1;
+        Plag=P0*(1-2*r); % Dispose of shares presumably acquired recently
+    elseif S_agej_peak_last==S_agej_last % Bulk liquidation
+        % Sell all remaining shares from first acquisition to buy-point (using geometric mean to average acquisition cost)
+        agej_bought=S_agej_peak_first-sqrt(S_agej_peak_first-S_agej_first);
+        Plag=P0*(1-2*r)^(agej-agej_bought);
+        at_death=0; % Don't bulk liquidate twice
+    else
+        % Estimate where we are past peak accumulation and mirror around to
+        % proportional acquisition point
+        agej_selling_pct=(agej-S_agej_peak_last)/(S_agej_last-S_agej_peak_last);
+        agej_bought=S_agej_peak_first-agej_selling_pct*(S_agej_peak_first-S_agej_first);
+        Plag=P0*(1-2*r)^(agej-agej_bought);
+    end
+    cg=tau_cg*(P0-Plag)*(s+AccidentBeq-sprime);
+end
+
+if at_death && agej_bought>=S_agej_first
+    % Sell all remaining shares from first acquisition to buy-point (using geometric mean to average acquisition cost)
+    Plag=P0*(1-2*r)^(agej_bought-sqrt(agej_bought-S_agej_first));
+    cg=cg+tau_cg*(P0-Plag)*sprime;
+end
+
+
+end

OLGModel14_HouseholdConsumptionFn.m

@@ -1,4 +1,4 @@
-function c=OLGModel14_HouseholdConsumptionFn(h,sprime,s,z,e,agej,Jr,pension,w,P0,D,kappa_j,AccidentBeq,r,tau_l,tau_d,tau_cg)
+function c=OLGModel14_HouseholdConsumptionFn(h,sprime,s,z,e,agej,Jr,pension,w,P0,D,kappa_j,AccidentBeq,r,tau_l,tau_d,tau_cg,S_agej_first,S_agej_peak_first,S_agej_peak_last,S_agej_last)
 % Replace assets with 'share holdings'
 % Get rid of progressive taxes
 % Add Lhnormalize
@@ -7,16 +7,36 @@
 % 1+r = (P0 +(1-tau_d)D - tau_cg(P0-P))/Plag
 % We are looking at stationary general eqm, so
 % Plag=P;
-% And thus we have
-P=((1-tau_cg)*P0 + (1-tau_d)*D)/(1+r-tau_cg);
+% And thus we have P=((1-tau_cg)*P0 + (1-tau_d)*D)/(1+r-tau_cg);
 
-Plag=P; % As stationary general eqm
+P=P0;
+if sprime>=s
+    agej_bought=agej;
+    Plag=P0; % We are holding or buying, so no capital gains
+    cg=0;
+else
+    if agej<=S_agej_peak_first
+        agej_bought=agej-1;
+        Plag=P0*(1-2*r); % Dispose of shares presumably acquired recently
+    elseif S_agej_peak_last==S_agej_last % Bulk liquidation
+        % Sell all remaining shares from first acquisition to buy-point (using geometric mean to average acquisition cost)
+        agej_bought=S_agej_peak_first-sqrt(S_agej_peak_first-S_agej_first);
+        Plag=P0*(1-2*r)^(agej-agej_bought);
+    else
+        % Estimate where we are past peak accumulation and mirror around to
+        % proportional acquisition point
+        agej_selling_pct=(agej-S_agej_peak_last)/(S_agej_last-S_agej_peak_last);
+        agej_bought=S_agej_peak_first-agej_selling_pct*(S_agej_peak_first-S_agej_first);
+        Plag=P0*(1-2*r)^(agej-agej_bought);
+    end
+    cg=tau_cg*(P0-Plag)*(s+AccidentBeq-sprime);
+end
 
 if agej<Jr % If working age
     %consumption = labor income + accidental bequest + share holdings (including dividend) - capital gains tax - next period share holdings
-    c=(1-tau_l)*w*kappa_j*exp(z+e)*h+((1-tau_d)*D+P0)*(s+AccidentBeq) -tau_cg*(P0-Plag)*(s+AccidentBeq)-P*sprime; 
+    c=(1-tau_l)*w*kappa_j*exp(z+e)*h+((1-tau_d)*D+P0)*(s+AccidentBeq) -cg -P*sprime; 
 else % Retirement
-    c=pension+((1-tau_d)*D+P0)*(s+AccidentBeq) -tau_cg*(P0-Plag)*(s+AccidentBeq) - P*sprime;
+    c=pension+((1-tau_d)*D+P0)*(s+AccidentBeq) -cg -P*sprime;
 end
 
 % Notice that sprime>=0 is being implicitly imposed by grid on s

OLGModel14_HouseholdIncomeFn.m

@@ -1,4 +1,4 @@
-function income=OLGModel14_HouseholdIncomeFn(h,sprime,s,z,e,agej,Jr,pension,w,P0,D,kappa_j,AccidentBeq,r,tau_l,tau_d,tau_cg)
+function income=OLGModel14_HouseholdIncomeFn(h,sprime,s,z,e,agej,Jr,pension,w,P0,D,kappa_j,AccidentBeq,r,tau_l,tau_d,tau_cg,S_agej_first,S_agej_peak_first,S_agej_peak_last,S_agej_last)
 % Replace assets with 'share holdings'
 % Get rid of progressive taxes
 % Add Lhnormalize
@@ -7,17 +7,36 @@
 % 1+r = (P0 +(1-tau_d)D - tau_cg(P0-P))/Plag
 % We are looking at stationary general eqm, so
 % Plag=P;
-% And thus we have
-P=((1-tau_cg)*P0 + (1-tau_d)*D)/(1+r-tau_cg);
+% And thus we have P=((1-tau_cg)*P0 + (1-tau_d)*D)/(1+r-tau_cg);
 
-Plag=P; % As stationary general eqm
+if sprime>=s
+    agej_bought=agej;
+    Plag=P0; % We are holding or buying, so no capital gains
+    cg=0;
+else
+    if agej<=S_agej_peak_first
+        agej_bought=agej-1;
+        Plag=P0*(1-2*r); % Dispose of shares presumably acquired recently
+    elseif S_agej_peak_last==S_agej_last % Bulk liquidation
+        % Sell all remaining shares from first acquisition to buy-point (using geometric mean to average acquisition cost)
+        agej_bought=S_agej_peak_first-sqrt(S_agej_peak_first-S_agej_first);
+        Plag=P0*(1-2*r)^(agej-agej_bought);
+    else
+        % Estimate where we are past peak accumulation and mirror around to
+        % proportional acquisition point
+        agej_selling_pct=(agej-S_agej_peak_last)/(S_agej_last-S_agej_peak_last);
+        agej_bought=S_agej_peak_first-agej_selling_pct*(S_agej_peak_first-S_agej_first);
+        Plag=P0*(1-2*r)^(agej-agej_bought);
+    end
+    cg=tau_cg*(P0-Plag)*(s+AccidentBeq-sprime);
+end
 
 if agej<Jr % If working age
     %consumption = labor income + accidental bequest + share holdings (including dividend) - capital gains tax - next period share holdings
     % income just is consumption but without subtracting the term for next period share holdings (-P*sprime)
-    income=(1-tau_l)*w*kappa_j*exp(z+e)*h+((1-tau_d)*D+P0)*(s+AccidentBeq) -tau_cg*(P0-Plag)*(s+AccidentBeq); 
+    income=(1-tau_l)*w*kappa_j*exp(z+e)*h+((1-tau_d)*D+P0)*(s+AccidentBeq) -cg; 
 else % Retirement
-    income=pension+((1-tau_d)*D+P0)*(s+AccidentBeq) -tau_cg*(P0-Plag)*(s+AccidentBeq);
+    income=pension+((1-tau_d)*D+P0)*(s+AccidentBeq) -cg;
 end
 
 % Notice that sprime>=0 is being implicitly imposed by grid on s

OLGModel14_HouseholdReturnFn.m

@@ -1,23 +1,57 @@
-function F=OLGModel14_HouseholdReturnFn(h,sprime,s,z,e,sigma,psi,eta,agej,Jr,J,pension,w,P0,D,kappa_j,warmglow1,warmglow2,AccidentBeq,r,tau_l,tau_d,tau_cg)
+function F=OLGModel14_HouseholdReturnFn(h,sprime,s,z,e,sigma,psi,eta,agej,Jr,J,pension,w,P0,D,kappa_j,warmglow1,warmglow2,AccidentBeq,r,tau_l,tau_d,tau_cg,S_agej_first,S_agej_peak_first,S_agej_peak_last,S_agej_last)
 % Replace assets with 'share holdings'
 % Get rid of progressive taxes
 % Add Lhnormalize
 
+
 % We can get P from the equation that defines r as the return to the mutual fund
 % 1+r = (P0 +(1-tau_d)D - tau_cg(P0-P))/Plag
 % We are looking at stationary general eqm, so
 % Plag=P;
-% And thus we have
-P=((1-tau_cg)*P0 + (1-tau_d)*D)/(1+r-tau_cg);
+% And thus we have P=((1-tau_cg)*P0 + (1-tau_d)*D)/(1+r-tau_cg);
+
+% But in fact the price does not meaningfully represent the acquisition
+% cost by a younger generation that is now older in this stationary
+% distribution.  However, we can use the history of acquisition and
+% disposals to impute when agents are buying and selling, and thus what
+% capital gains they should pay.  We imagine that stocks earn 2x the
+% risk-free rate of return (i.e., 2*r) and that if we are selling before
+% they peak, we are selling recently acquired stocks, whereas if we are
+% selling at or after the peak of acquisition, we are selling long-term
+% gains in a LIFO fashion.
 
-Plag=P; % As stationary general eqm
+% We take P0 as the price of the current stationary distribution, and we
+% back-calculate what the price Plag may have been in the past.
+
+P=P0;
+if sprime>=s
+    agej_bought=agej;
+    Plag=P0; % We are holding or buying, so no capital gains
+    cg=0;
+else
+    if agej<=S_agej_peak_first
+        agej_bought=agej-1;
+        Plag=P0*(1-2*r); % Dispose of shares presumably acquired recently
+    elseif S_agej_peak_last==S_agej_last % Bulk liquidation
+        % Sell all remaining shares from first acquisition to buy-point (using geometric mean to average acquisition cost)
+        agej_bought=S_agej_peak_first-sqrt(S_agej_peak_first-S_agej_first);
+        Plag=P0*(1-2*r)^(agej-agej_bought);
+    else
+        % Estimate where we are past peak accumulation and mirror around to
+        % proportional acquisition point
+        agej_selling_pct=(agej-S_agej_peak_last)/(S_agej_last-S_agej_peak_last);
+        agej_bought=S_agej_peak_first-agej_selling_pct*(S_agej_peak_first-S_agej_first);
+        Plag=P0*(1-2*r)^(agej-agej_bought);
+    end
+    cg=tau_cg*(P0-Plag)*(s+AccidentBeq-sprime);
+end
 
 F=-Inf;
 if agej<Jr % If working age
     %consumption = labor income + accidental bequest + share holdings (including dividend) - capital gains tax - next period share holdings
-    c=(1-tau_l)*w*kappa_j*exp(z+e)*h+((1-tau_d)*D+P0)*(s+AccidentBeq) -tau_cg*(P0-Plag)*(s+AccidentBeq)-P*sprime; 
+    c=(1-tau_l)*w*kappa_j*exp(z+e)*h+((1-tau_d)*D+P0)*(s+AccidentBeq) -cg -P*sprime; 
 else % Retirement
-    c=pension+((1-tau_d)*D+P0)*(s+AccidentBeq) -tau_cg*(P0-Plag)*(s+AccidentBeq) - P*sprime;
+    c=pension+((1-tau_d)*D+P0)*(s+AccidentBeq) -cg -P*sprime;
 end
 
 if c>0