Finance Papers

Document Type

Journal Article

Date of this Version

1989

Publication Source

Review of Economic Studies

Volume

56

Issue

1

Start Page

1

Last Page

19

DOI

10.2307/2297746

Abstract

The issue of dynamic efficiency is central to analyses of capital accumulation and economic growth. Yet the question of what characteristics should be examined to determine whether actual economies are dynamically efficient is unresolved. This paper develops a criterion for determining whether an economy is dynamically efficient. The criterion, which holds for economies in which technological progress and population growth are stochastic, involves a comparison of the cash flows generated by capital with the level of investment. Its application to the United States economy and the economies of other major OECD nations suggests that they are dynamically efficient.

Copyright/Permission Statement

This is a pre-copyedited, author-produced PDF of an article accepted for publication in Review of Economic Studies following peer review. The version of record is available online at: http://dx.doi.org/10.2307/2297746.

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Date Posted: 27 November 2017

This document has been peer reviewed.