Bloise, Gaetano and Calciano, Filippo L. (2007): A Characterization of Inefficiency in Stochastic Overlapping Generations Economies. Forthcoming in: Journal of Economic Theory (2008)

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Abstract
In this paper, we provide a characterization of interim inefficiency in stochastic economies of overlapping generations under possibly sequentially incomplete markets. With respect to the established body of results in the literature, we remove the hypothesis of twoperiod horizons, by considering longer, though uniformly bounded, horizons for generations. The characterization exploits a suitably Modified Cass Criterion, grounded on the longrung behavior of compounded safe interest rates and independent of the length of horizons of generations. Thus, the hypothesis of twoperiod horizons is purely heuristic in establishing a criterion for inefficiency. In addition, for sequentially incomplete markets, we adopt a suitable notion of unambiguous inefficiency, separating the inefficient intertemporal allocation of resources from incomplete risksharing. Unambiguous inefficiency reduces to inefficiency when markets are sequentially complete.
Item Type:  MPRA Paper 

Original Title:  A Characterization of Inefficiency in Stochastic Overlapping Generations Economies 
Language:  English 
Subjects:  D  Microeconomics > D6  Welfare Economics > D61  Allocative Efficiency ; CostBenefit Analysis D  Microeconomics > D5  General Equilibrium and Disequilibrium > D52  Incomplete Markets 
Item ID:  8780 
Depositing User:  Filippo L. Calciano 
Date Deposited:  18. May 2008 04:40 
Last Modified:  23. Mar 2015 19:24 
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URI:  http://mpra.ub.unimuenchen.de/id/eprint/8780 