A bit More on Dynamic Inefficiency

I recently asked if increased government debt causes increased welfare if the growth rate of the economy is greater than the safe rate of interest, even if the growth rate is lower than the risky rate of return on capital.

With much help from a comment by Nick Rowe, I present an example in which the answer is yes.

I have added to the pdf to present the models which I was considering before reading his comment.

update: the newer extended and corrected pdf is here

The conclusions are less striking, but the other models might add something.