Is There a General Criterion for Dynamic Efficiency
Working Paper No. 89
8 Pages Posted: 6 Sep 2000
Date Written: August 1999
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.
JEL Classification: D69, D99
Suggested Citation: Suggested Citation