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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

Jean-François Mertens  and
Anna Rubinchik
Jean-François Mertens
Affiliation:
CORE, Université Catholique de Louvain
Anna Rubinchik*
Affiliation:
University of Haifa
*
Address correspondence to: Anna Rubinchik, Department of Economics, University of Haifa, Mount Carmel, Haifa 31905, Israel; e-mail: annarubinchik@gmail.com.
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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).

Keywords

Infinite EconomiesOverlapping GenerationsExogenous GrowthGolden Rule Equilibrium
Type
Articles
Information
Macroeconomic Dynamics , Volume 19 , Issue 8 , December 2015 , pp. 1780 - 1799
Copyright
Copyright © Cambridge University Press 2015 

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