Allocative and productive efficiency are static concepts in the sense that they relate to welfare at a point in time. Allocative and productive efficiency reflect the outcome at a single point in time of resource allocation and production decisions.

A familiar result in the theory of private intergenerational transfers is that competitive equilibria with gifts from children to their parents are dynamically inefficient whereas they are dynamically efficient with bequests from parents to their children. This note demonstrates that if growth...