Dynamically Inefficient Equilibria in the Auberbach-Kotlikoff Model

Posted: 20 Oct 2008

Date Written: 1993


The issue addressed in this paper is how robust dynamically efficient steady state equilibria in a 55 period overlapping generations economy are to changes in the parametrization of the model. Numerical simulations are used to detect parameter constellations which lead to non Pareto optimal market solutions with the capital stock in excess of the so called Golden Rule level. The results suggest that rather unplausible values of the pure rate of time preference, the intertemporal elasticity of substitution or the annal population growth rate are required to obtain dynamic inefficiency.

Keywords: dynmaic inefficieny, Auerbach-Kotlikoff model, Golden Rule

JEL Classification: C68, E13, O41

Suggested Citation

Larch, Martin, Dynamically Inefficient Equilibria in the Auberbach-Kotlikoff Model (1993). Empirical Economics, Vol. 18, No. 1, 1993, Available at SSRN: https://ssrn.com/abstract=1286053

Martin Larch (Contact Author)

European Fiscal Board ( email )

0032 2 2969244 (Phone)

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