Is There a General Criterion for Dynamic Efficiency?

M. A. C. Martins and Joao Ricardo Faria

No 89, Working Paper Series from Finance Discipline Group, UTS Business School, University of Technology, Sydney

Abstract: 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.

Keywords: dynamic efficiency; bequest motive; overlapping generations; capital accumulation (search for similar items in EconPapers)
JEL-codes: D69 D99 (search for similar items in EconPapers)
Pages: 9 pages
Date: 1999-08-01
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