Dynamic Efficiency in the Two-Sector Overlapping Generations Model

Emily Cremers

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: This paper examines dynamic efficiency in the context of a two-sector overlappinggenerations model. First, conditions for dynamic efficiency in a centrally planned economy arederived. Then, in a competitive environment, the implications of dynamic (in)efficiency for thesteady state relative price and steady state welfare are demonstrated. For the special case of alog-linear world, the golden rule savings rate is identified along with restrictions on parametersthat yield dynamically efficient steady states. The results are further demonstrated via awelfare analysis of a simple tax/subsidy scheme.

Keywords: dynamic efficiency; overlapping generations model; Two-Sector (search for similar items in EconPapers)
JEL-codes: D9 E13 O41 (search for similar items in EconPapers)
Date: 2006-01-27
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Citations: View citations in EconPapers (16)

Published in Journal of Economic Dynamics and Control 2006, vol. 30 no. 11, pp. 1915-1936

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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:34856

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