TY - JOUR AU - Abel, Andrew B AU - Mankiw, N. Gregory AU - Summers, Lawrence H AU - Zeckhauser, Richard J TI - Assessing Dynamic Efficiency: Theory and Evidence JF - National Bureau of Economic Research Working Paper Series VL - No. 2097 PY - 1986 Y2 - December 1986 DO - 10.3386/w2097 UR - http://www.nber.org/papers/w2097 L1 - http://www.nber.org/papers/w2097.pdf N1 - Author contact info: Andrew B. Abel The Wharton School University of Pennsylvania 2315 Steinberg Hall - Dietrich Hall Philadelphia, PA 19104-6367 Tel: 215/898-4801 Fax: 215/573-7244 E-Mail: abel@wharton.upenn.edu N. Gregory Mankiw Department of Economics Littauer 223 Harvard University Cambridge, MA 02138 Tel: 617/495-4301 Fax: 617/495-7730 E-Mail: ngmankiw@fas.harvard.edu Lawrence H. Summers Harvard Kennedy School of Government 79 JFK Street Cambridge, MA 02138 Tel: 617/495-9322 Fax: 617/495-0436 E-Mail: lhs@harvard.edu Richard J. Zeckhauser John F. Kennedy School of Government Harvard University 79 John F. Kennedy Street Cambridge, MA 02138 Tel: 617/495-1174 Fax: 617/384-9340 E-Mail: richard_zeckhauser@harvard.edu AB - The issue of dynamic efficiency is central to analyses of capital accumulation and economic growth. Yet the question of what operating characteristics of an economy subject to productivity shocks should be examined to determine whether or not it is efficient has not been resolved. This paper develops criterion based on observables for determining whether or not an economy is dynamically efficient. The criterion involves a comparison of the cash flows generated by capital with the volume of investment. Its application to the United States economy and the economies of other major OECD nations suggests that they are dynamically efficient. ER -