Finance Discipline Group
UTS Business School
University of Technology, Sydney

Working Paper Series

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.
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