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Demonstrating inefficiency in overlapping generations models

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  • Burke, Jonathan L.

Abstract

We find for overlapping generations models competitive equilibria that are not only Pareto inefficient, but for which every allocation that agrees with the equilibrium in the first period is also Pareto inefficient. That novel additional condition implies that a policy restoring Pareto efficiency is urgent (must start in the first period), and observing just the first period of the equilibrium allocation demonstrates the Pareto inefficiency of the entire allocation.

Suggested Citation

  • Burke, Jonathan L., 2017. "Demonstrating inefficiency in overlapping generations models," Economics Letters, Elsevier, vol. 150(C), pages 108-110.
    • Handle: RePEc:eee:ecolet:v:150:y:2017:i:c:p:108-110
    DOI: 10.1016/j.econlet.2016.11.004
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    References listed on IDEAS

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    1. Mas-Colell,Andreu, 1990. "The Theory of General Economic Equilibrium," Cambridge Books, Cambridge University Press, number 9780521388702, January.
    2. 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.
    3. Geanakoplos, J. D. & Polemarchakis, H. M., 1984. "Intertemporally separable, overlapping-generations economies," Journal of Economic Theory, Elsevier, vol. 34(2), pages 207-215, December.
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    Cited by:

    1. Orlando Gomes, 2022. "Human capital and growth in an OLG-life cycle model," SN Business & Economics, Springer, vol. 2(1), pages 1-26, January.

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    More about this item

    Keywords

    Overlapping generations; Inefficient; Urgent; Demonstrate;
    All these keywords.

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D6 - Microeconomics - - Welfare Economics
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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