Abstract
Abstract In a seminal contribution Abel, Mankiw, Summers, and Zeckhauser (1989) show that from an aggregate dynamic perspective the US economy is Pareto efficient. We argue that, when applying their test, they implicitly make strong assumptions about the economy's future behavior. We show how time series evidence may easily lead to wrong conclusions about the welfare properties of real world economies.We present a test criterion based on Zilcha (1991) and robust evidence that the US economy does not overaccumulate capital. Our contribution highlights that the distinction between efficient capital accumulation and Pareto efficiency is empirically relevant. The latter efficiency benchmark - encompassing also risk sharing issues - cannot be rigorously tested based on available approaches in the literature.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
