Dynamic Efficiency in the Two-Sector Overlapping Generations Model
This paper examines dynamic efficiency in the context of a two-sector overlappinggenerations model. First, conditions for dynamic efficiency in a centrally planned economy arederived. Then, in a competitive environment, the implications of dynamic (in)efficiency for thesteady state relative price and steady state welfare are demonstrated. For the special case of alog-linear world, the golden rule savings rate is identified along with restrictions on parametersthat yield dynamically efficient steady states. The results are further demonstrated via awelfare analysis of a simple tax/subsidy scheme.
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|Date of creation:||27 Jan 2006|
|Date of revision:|
|Publication status:||Published in Journal of Economic Dynamics and Control 2006, vol. 30 no. 11, pp. 1915-1936|
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