IDEAS home Printed from https://ideas.repec.org/p/koe/wpaper/1801.html
   My bibliography  Save this paper

Dynamic efficiency in world economy

Author

Listed:
  • Kevin Luo

    (Graduate School of Economics, Kobe University)

  • Tomoko Kinugasa

    (Graduate School of Economics, Kobe University)

  • Kai Kajitani

    (Graduate School of Economics, Kobe University)

Abstract

This study re-estimates dynamic efficiency based on the AMSZ (1989) criterion by exploiting the largest dataset assembled to date. It reveals that major economies conform to a similar "U-shaped curve" in their evolution of capital accumulation; that is, a period of decreasing efficiency followed by one of increasing efficiency. It also indicates that nations are not necessarily dynamically efficient if statistical bias is considered. As a prime example, China today is unquestionably in a serious state of dynamic inefficiency. The study discusses the theoretical limitations of AMSZ (1989), and calls for new breakthroughs in efficiency criteria.

Suggested Citation

  • Kevin Luo & Tomoko Kinugasa & Kai Kajitani, 2018. "Dynamic efficiency in world economy," Discussion Papers 1801, Graduate School of Economics, Kobe University.
    • Handle: RePEc:koe:wpaper:1801
    as

    Download full text from publisher

    File URL: http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2018/1801.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Tertilt, Michèle & Schoonbroodt, Alice, 2010. "Who Owns Children and Does it Matter?," CEPR Discussion Papers 7653, C.E.P.R. Discussion Papers.
    2. repec:hal:wpspec:info:hdl:2441/8607 is not listed on IDEAS
    3. Frederic S. Mishkin, 1984. "The Real Interest Rate: A Multi-Country Empirical Study," Canadian Journal of Economics, Canadian Economics Association, vol. 17(2), pages 283-311, May.
    4. Stefan Homburg, 2014. "Overaccumulation, Public Debt and the Importance of Land," German Economic Review, Verein für Socialpolitik, vol. 15(4), pages 411-435, November.
    5. Jun Zhang & Tian Zhu, 2015. "Reestimating China’s Underestimated Consumption," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 57(1), pages 55-74, March.
    6. Andrew B. Abel & N. Gregory Mankiw & Lawrence H. Summers & Richard J. Zeckhauser, 1989. "Assessing Dynamic Efficiency: Theory and Evidence," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 56(1), pages 1-19.
    7. Fischer, Thomas, 2017. "Thomas Piketty and the rate of time preference," Journal of Economic Dynamics and Control, Elsevier, vol. 77(C), pages 111-133.
    8. Julia, Knolle, 2014. "An Empirical Comparison of Interest and Growth Rates," MPRA Paper 59520, University Library of Munich, Germany.
    9. Dong He & Wenlang Zhang & Jimmy Shek, 2007. "How Efficient Has Been China'S Investment? Empirical Evidence From National And Provincial Data," Pacific Economic Review, Wiley Blackwell, vol. 12(5), pages 597-617, December.
    10. Blanchard Olivier & Weil Philippe, 2001. "Dynamic Efficiency, the Riskless Rate, and Debt Ponzi Games under Uncertainty," The B.E. Journal of Macroeconomics, De Gruyter, vol. 1(2), pages 1-23, November.
    11. Martin Feldstein & Lawrence Summers, 1977. "Is the Rate of Profit Falling?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 8(1), pages 211-228.
    12. Barbie, Martin & Hagedorn, Marcus & Kaul, Ashok, 2001. "Government Debt as Insurance against Macroeconomic Risk," IZA Discussion Papers 412, Institute of Labor Economics (IZA).
    13. Barbie Martin & Hagedorn Marcus & Kaul Ashok, 2004. "Assessing Aggregate Tests of Efficiency for Dynamic Economies," The B.E. Journal of Macroeconomics, De Gruyter, vol. 4(1), pages 1-17, December.
    14. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467-467.
    15. Desai, Mihir A. & Foley, C. Fritz & Hines, James R. Jr., 2011. "Tax Policy and the Efficiency of U.S. Direct Investment Abroad," National Tax Journal, National Tax Association;National Tax Journal, vol. 64(4), pages 1055-1082, December.
    16. Thomas Piketty & Gabriel Zucman, 2014. "Capital is Back: Wealth-Income Ratios in Rich Countries 1700–2010," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(3), pages 1255-1310.
    17. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    18. Chattopadhyay, Subir, 2008. "The Cass criterion, the net dividend criterion, and optimality," Journal of Economic Theory, Elsevier, vol. 139(1), pages 335-352, March.
    19. Feldstein, Martin, 1985. "Debt and taxes in the theory of public finance," Journal of Public Economics, Elsevier, vol. 28(2), pages 233-245, November.
    20. Philippe Weil, 2008. "Overlapping Generations: The First Jubilee," Journal of Economic Perspectives, American Economic Association, vol. 22(4), pages 115-134, Fall.
    21. repec:ucp:bkecon:9780226301532 is not listed on IDEAS
    22. Bullard, James & Russell, Steven, 1999. "An empirically plausible model of low real interest rates and unbacked government debt," Journal of Monetary Economics, Elsevier, vol. 44(3), pages 477-508, December.
    23. Feldstein, Martin S, 1977. "Does the United States Save too Little?," American Economic Review, American Economic Association, vol. 67(1), pages 116-121, February.
    24. repec:hal:spmain:info:hdl:2441/8607 is not listed on IDEAS
    25. Gabriel Zucman, 2013. "The Missing Wealth of Nations: Are Europe and the U.S. net Debtors or net Creditors?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(3), pages 1321-1364.
    26. Fakin, B., 1998. "A note on assessing dynamic efficiency," Structural Change and Economic Dynamics, Elsevier, vol. 9(2), pages 263-268, June.
    27. Davis, Morris A. & Heathcote, Jonathan, 2007. "The price and quantity of residential land in the United States," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2595-2620, November.
    28. Xu, Xianchun, 2008. "Some differences in GDP measurements between China's practice and 1993 SNA guideline," China Economic Review, Elsevier, vol. 19(3), pages 480-488, September.
    29. Zilcha, Itzhak, 1991. "Characterizing efficiency in stochastic overlapping generations models," Journal of Economic Theory, Elsevier, vol. 55(1), pages 1-16, October.
    30. Christensen, Laurits R, 1971. "Entrepreneurial Income: How Does It Measure Up?," American Economic Review, American Economic Association, vol. 61(4), pages 575-585, September.
    31. repec:hal:wpspec:info:hdl:2441/8712 is not listed on IDEAS
    32. Zilcha, Itzhak, 1990. "Dynamic efficiency in overlapping generations models with stochastic production," Journal of Economic Theory, Elsevier, vol. 52(2), pages 364-379, December.
    33. Fang Liu & Jun Zhang & Tian Zhu, 2016. "How much can we trust China’s investment statistics?," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 14(3), pages 215-228, July.
    34. Kookshin Ahn, 2003. "Are East Asian Economies Dynamically Efficient?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 28(1), pages 101-110, June.
    35. Philippe Weil & Olivier Blanchard, 2001. "Debt Ponzi games and dynamic efficiency under uncertainty," ULB Institutional Repository 2013/13442, ULB -- Universite Libre de Bruxelles.
    36. Poterba, James M., 1998. "The rate of return to corporate capital and factor shares: new estimates using revised national income accounts and capital stock data," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 211-246, June.
    37. Anderson, Gordon, 1993. "An emperical note on assessing dynamic efficiency: Integration, co-integration, and the long run," Structural Change and Economic Dynamics, Elsevier, vol. 4(2), pages 345-352, December.
    38. repec:hal:spmain:info:hdl:2441/8712 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kevin Luo & Tomoko Kinugasa, 2020. "Challenges for China’s economic development: the saving glut and policy implication," International Journal of Economic Policy Studies, Springer, vol. 14(1), pages 47-75, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kevin Luo & Tomoko Kinugasa & Kai Kajitani, . "Dynamic Efficiency in World Economy," Prague Economic Papers, University of Economics, Prague, vol. 0.
    2. Kevin Luo & Tomoko Kinugasa & Kai Kajitani, 2020. "Dynamic Efficiency in World Economy," Prague Economic Papers, Prague University of Economics and Business, vol. 2020(5), pages 522-544.
    3. Julia, Knolle, 2014. "An Empirical Comparison of Interest and Growth Rates," MPRA Paper 59520, University Library of Munich, Germany.
    4. Stefan Homburg, 2014. "Overaccumulation, Public Debt and the Importance of Land," German Economic Review, Verein für Socialpolitik, vol. 15(4), pages 411-435, November.
    5. Gaetano Bloise & Pietro Reichlin, 2023. "Low safe interest rates: A case for dynamic inefficiency?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 633-656, December.
    6. Wigniolle, B., 2014. "Optimism, pessimism and financial bubbles," Journal of Economic Dynamics and Control, Elsevier, vol. 41(C), pages 188-208.
    7. Philippe Weil, 2008. "Overlapping Generations: The First Jubilee," Journal of Economic Perspectives, American Economic Association, vol. 22(4), pages 115-134, Fall.
    8. repec:hal:spmain:info:hdl:2441/8712 is not listed on IDEAS
    9. Knolle, Julia, 2020. "Prosperity in a Low Interest Environment," MPRA Paper 104332, University Library of Munich, Germany.
    10. Elmendorf, Douglas W. & Gregory Mankiw, N., 1999. "Government debt," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 25, pages 1615-1669, Elsevier.
    11. Dirk Krueger & Felix Kubler, 2006. "Pareto-Improving Social Security Reform when Financial Markets are Incomplete!?," American Economic Review, American Economic Association, vol. 96(3), pages 737-755, June.
    12. Chattopadhyay, Subir, 2008. "The Cass criterion, the net dividend criterion, and optimality," Journal of Economic Theory, Elsevier, vol. 139(1), pages 335-352, March.
    13. LG Deidda & F. Cerina, 2002. "Do we need more time for leisure?," Working Paper CRENoS 200203, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    14. Barbie, Martin & Hagedorn, Marcus & Kaul, Ashok, 2001. "Government Debt as Insurance against Macroeconomic Risk," IZA Discussion Papers 412, Institute of Labor Economics (IZA).
    15. Olivier Blanchard, 2019. "Public Debt and Low Interest Rates," American Economic Review, American Economic Association, vol. 109(4), pages 1197-1229, April.
    16. Bertocchi, Graziella & Kehagias, Athanasios, 1995. "Efficiency and optimality in stochastic models with production," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 303-325.
    17. Martin Barbie & Ashok Kaul, 2009. "The Zilcha criteria for dynamic inefficiency reconsidered," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 40(2), pages 339-348, August.
    18. Coen N. Teulings, 2016. "Are Bubbles Bad? Is a higher debt target for the Euro-zone desirable?," Cambridge Working Papers in Economics 1643, Faculty of Economics, University of Cambridge.
    19. Hassler, J. & Lindbeck, A., 1997. "Intergenerational Risk Sharing, Stability and Optimality of Alternative Pension Systems," Papers 631, Stockholm - International Economic Studies.
    20. Stéphane Guibaud & Yves Nosbusch & Dimitri Vayanos, 2013. "Bond Market Clienteles, the Yield Curve, and the Optimal Maturity Structure of Government Debt," The Review of Financial Studies, Society for Financial Studies, vol. 26(8), pages 1914-1961.
    21. Schoonbroodt, Alice & Tertilt, Michèle, 2014. "Property rights and efficiency in OLG models with endogenous fertility," Journal of Economic Theory, Elsevier, vol. 150(C), pages 551-582.

    More about this item

    Keywords

    Dynamic efficiency; Capital over-accumulation; Cash-flow criterion; Interest rates; Pareto optimality;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:koe:wpaper:1801. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kimiaki Shirahama (email available below). General contact details of provider: https://edirc.repec.org/data/fekobjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.