Hostname: page-component-cd9895bd7-lnqnp Total loading time: 0 Render date: 2024-12-23T06:15:40.787Z Has data issue: false hasContentIssue false
  • English
  • Français

ON THE DYNAMIC EFFICIENCY OF BALANCED GROWTH PATHS IN AN ENDOGENOUS GROWTH SETTING

Published online by Cambridge University Press:  22 March 2016

Elena Del Rey  and
Miguel-Angel Lopez-Garcia
Elena Del Rey
Affiliation:
University of Girona
Miguel-Angel Lopez-Garcia*
Affiliation:
Autonomous University of Barcelona
*
Address correspondence to: Miguel-Angel Lopez-Garcia, Applied Economics Department, Autonomous University of Barcelona, 08193 Bellaterra, Barcelona, Spain; e-mail: [email protected].
Get access Rights & Permissions [Opens in a new window]

Abstract

In overlapping-generations economies with life-cycle saving and exogenous growth, the laissez-faire equilibrium balanced growth path fails in general to achieve optimality, but is dynamically efficient if the marginal product of physical capital is greater than the growth rate of the economy. In this paper, we accommodate the concept of dynamic (in)efficiency in an overlapping-generations economy with endogenous growth due to human capital accumulation. We show that the condition that the marginal product of physical capital is larger than the growth rate of the economy is necessary but no longer sufficient for the dynamic efficiency of the laissez-faire equilibrium balanced growth path.

Keywords

Endogenous GrowthHuman CapitalDynamic Efficiency
Type
Articles
Information
Macroeconomic Dynamics , Volume 21 , Issue 8 , December 2017 , pp. 1837 - 1856
Copyright
Copyright © Cambridge University Press 2016 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We are grateful to two anonymous referees for their helpful comments on an earlier version. We also acknowledge financial support from Instituto de Estudios Fiscales (Spanish Ministry of Finance), the Spanish Ministry of Science (Projects ECO2013-45395-R and ECO2012-37572) and the Generalitat de Catalunya (Contracts 2014SGR1360 and 2014SGR327 and the XREPP).

References

REFERENCES

Abel, A.B., Mankiw, N.G., Summers, L.H., and Zeckhauser, R.J. (1989) Assessing dynamic efficiency: Theory and evidence. Review of Economic Studies 56 (1), 1–19.Google Scholar
Arrow, K.J. and Kurz, M. (1970) Optimal growth with irreversible investment in a Ramsey model. Econometrica 38 (2), 331–344.CrossRefGoogle Scholar
Barbie, M. and Kaul, A. (2009) The Zilcha criteria for dynamic inefficiency reconsidered. Economic Theory 40 (2), 339–348.Google Scholar
Bishnu, M. (2013) Linking consumption externalities with optimal accumulation of human and physical capital and intergenerational transfers. Journal of Economic Theory 148, 720–742.Google Scholar
Boldrin, M. and Montes, A. (2005) The intergenerational state: Education and pensions. Review of Economic Studies 72, 651–664.CrossRefGoogle Scholar
Boldrin, M. and Montes, A. (2009) Assessing the efficiency of public education and pensions. Journal of Population Economics 22 (2), 285–309.Google Scholar
Buiter, W.H. (1979) Government finance in an overlapping generations model with gifts and bequests. In Von Furstenberg, G.M. (ed.), Social Security versus Private Saving, pp. 395–429. Cambridge, MA: Ballinger.Google Scholar
De La Croix, D. and Michel, P. (2002) A Theory of Economic Growth: Dynamics and Policy in Overlapping Generations. Cambridge, UK: Cambridge University Press.CrossRefGoogle Scholar
Del Rey, E. and Lopez-Garcia, M.A. (2013) Optimal education and pensions in an endogenous growth model. Journal of Economic Theory 148 (4), 1737–1750.Google Scholar
Diamond, P. (1965) National debt in an neoclassical growth model. American Economic Review 55 (1), 1126–1150.Google Scholar
Docquier, F., Paddison, O., and Pestieau, P. (2007) Optimal accumulation in an endogenous growth setting with human capital. Journal of Economic Theory 134, 361–378.CrossRefGoogle Scholar
Galor, O. and Ryder, H. (1989) Existence, uniqueness, and stability of equilibrium in an overlapping-generations model with productive capital. Journal of Economic Theory 49 (2), 360–375.CrossRefGoogle Scholar
Galor, O. and Ryder, H. (1991) Dynamic efficiency of steady-state equilibria in an overlapping-generations model with productive capital. Economics Letters 35 (4), 385–390.CrossRefGoogle Scholar
Lang, G. (1992) Dynamic efficiency and capital accumulation. European Journal of Political Economy 8, 153–174.Google Scholar
Li, J. and Lin, S. (2012) Existence and uniqueness of steady-state equilibrium in a generalized overlapping generations model. Macroeconomic Dynamics 16 (Supplement 3), 299–311.Google Scholar
Phelps, E.S. (1961) The golden rule of accumulation: A fable for growthmen. American Economic Review 51, 638–643.Google Scholar
Rangazas, P. and Russell, S. (2005) The Zilcha criterion for dynamic inefficiency. Economic Theory 26 (3), 701–716.Google Scholar
Samuelson, P.A. (1958) An exact consumption loan model of interest with or without the social contrivance of money. Journal of Political Economy 66, 456–482.CrossRefGoogle Scholar
Samuelson, P.A. (1968) The two-part golden rule deduced as the asymptotic turnpike of catenary motions. Western Economic Journal 6, 85–89.Google Scholar
Samuelson, P. (1975a) Optimum social security in a life-cycle growth model. International Economic Review 16 (3), 539–544.Google Scholar
Samuelson, P. (1975b) The optimum growth rate for population. International Economic Review 16 (3), 531–538.Google Scholar
Zilcha, I. (1990) Dynamic efficiency in overlapping generations models with stochastic production. Journal of Economic Theory 52 (2), 364–379.Google Scholar
Zilcha, I. (1991) Characterizing efficiency in stochastic overlapping generations models. Journal of Economic Theory 55 (1), 1–16.CrossRefGoogle Scholar