Assessing Aggregate Tests of Efficiency for Dynamic Economies

Barbie Martin (), Marcus Hagedorn and Kaul Ashok ()
Additional contact information
Barbie Martin: Universität Karlsruhe
Kaul Ashok: Universitat Pompeu Fabra

The B.E. Journal of Macroeconomics, 2004, vol. 4, issue 1, 17

Abstract: In a seminal contribution Abel, Mankiw, Summers, and Zeckhauser (1989) show that from an aggregate dynamic perspective the US economy is Pareto efficient. We argue that, when applying their test, they implicitly make strong assumptions about the economy's future behavior. We show how time series evidence may easily lead to wrong conclusions about the welfare properties of real world economies.We present a test criterion based on Zilcha (1991) and robust evidence that the US economy does not overaccumulate capital. Our contribution highlights that the distinction between efficient capital accumulation and Pareto efficiency is empirically relevant. The latter efficiency benchmark - encompassing also risk sharing issues - cannot be rigorously tested based on available approaches in the literature.

Keywords: Overaccumulation of Capital; Dynamic Efficiency; Interim Pareto Optimality (search for similar items in EconPapers)
Date: 2004
References: View complete reference list from CitEc
Citations: View citations in EconPapers (27)

Downloads: (external link)
https://doi.org/10.2202/1534-5998.1207 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:bejmac:v:topics.4:y:2004:i:1:n:16

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/bejm/html

DOI: 10.2202/1534-5998.1207

Access Statistics for this article

The B.E. Journal of Macroeconomics is currently edited by Arpad Abraham and Tiago Cavalcanti

More articles in The B.E. Journal of Macroeconomics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().