Assessing Dynamic Efficiency: Theory and Evidence

41 Pages Posted: 4 Apr 2004  

Andrew B. Abel

University of Pennsylvania - Finance Department; National Bureau of Economic Research (NBER)

N. Gregory Mankiw

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Lawrence H. Summers

Harvard University; National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Date Written: December 1986

Abstract

The issue of dynamic efficiency is central to analyses of capital accumulation and economic growth. Yet the question of what operating characteristics of an economy subject to productivity shocks should be examined to determine whether or not it is efficient has not been resolved. This paper develops criterion based on observables for determining whether or not an economy is dynamically efficient. The criterion involves a comparison of the cash flows generated by capital with the volume of investment. Its application to the United States economy and the economies of other major OECD nations suggests that they are dynamically efficient.

Suggested Citation

Abel, Andrew B. and Mankiw, N. Gregory and Summers, Lawrence H. and Zeckhauser, Richard J., Assessing Dynamic Efficiency: Theory and Evidence (December 1986). NBER Working Paper No. w2097. Available at SSRN: https://ssrn.com/abstract=344866

Andrew B. Abel (Contact Author)

National Bureau of Economic Research (NBER)

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University of Pennsylvania - Finance Department ( email )

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HOME PAGE: http://finance.wharton.upenn.edu/~abel/

N. Gregory Mankiw

Harvard University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Lawrence H. Summers

Harvard University ( email )

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Cambridge, MA 02138
United States
617-495-1502 (Phone)
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National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
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United States

Harvard University - Harvard Kennedy School (HKS) ( email )

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Cambridge, MA 02138
United States

Richard J. Zeckhauser

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-495-1174 (Phone)
617-496-3783 (Fax)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-495-1174 (Phone)
617-384-9340 (Fax)

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