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PARETO OPTIMALITY OF THE GOLDEN RULE EQUILIBRIUM IN AN OVERLAPPING GENERATIONS MODEL WITH PRODUCTION AND TRANSFERS
Published online by Cambridge University Press: 22 May 2015
Abstract
The main result is that the golden rule equilibrium (GRE) is Pareto optimal (in the classical sense) in an overlapping generations (OG) model with constant-returns-to-scale production, transfers, arbitrary life-time productivity and homogeneous instantaneous felicity. In addition, we extend Cass and Yaari's equivalence between efficiency (aggregate consumption dominance) and present value dominance (with evaluation made using a candidate equilibrium price path).
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