Demonstrating inefficiency in overlapping generations models

摘要

We find for overlapping generations models competitive equilibria that are not only Pareto inefficient, but for which every allocation that agrees with the equilibrium in the first period is also Pareto inefficient. That novel additional condition implies that a policy restoring Pareto efficiency is urgent (must start in the first period), and observing just the first period of the equilibrium allocation demonstrates the Pareto inefficiency of the entire allocation. (C) 2016 Elsevier B.V. All rights reserved.