Is There a General Criterion for Dynamic Efficiency?
This paper analyses an overlapping generations model with absolute bequest motive. It is shown that the widely accepted criterion to verify dynamic efficiency does not apply to this case. In our model the social planner maximizes welfare by choosing a capital stock larger than the golden rule and a real rate of interest smaller than the rate of growth of the economy.
|Date of creation:||01 Aug 1999|
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- Martins, Marco A. C., 1995. "Bonds, interest and capital accumulation," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 49(4), October.
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- Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834.
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