Is There a General Criterion for Dynamic Efficiency?
|Author(s):||M. A. C. Martins & Joao Ricardo Faria|
|Date of publication:||August 1999|
|Working paper number:||89|
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.
|Paper:||Download (Format: PDF, Size: 103 Kb)|