Handbook of International Economics

Chapter 9

Assessing International Efficiency*

Jonathan Heathcote^{a, b} and Fabrizio Perri^{a, b, c},    ^aFederal Reserve Bank of Minneapolis, Minneapolis, MN, USA, ^bCentre for Economic Policy Research, London, UK, ^cNational Bureau of Economic Research, Cambridge, MA, USA

Abstract

This chapter is structured in three parts. The first part outlines the methodological steps, involving both theoretical and empirical work, for assessing whether an observed allocation of resources across countries is efficient. The second part applies the methodology to the long-run allocation of capital and consumption in a large cross section of countries. We find that countries that grow faster in the long run also tend to save more both domestically and internationally. ...