Dynamic efficiency and the two-part golden rule with heterogeneous agents

► Characterizes efficiency in the neoclassical OLG model with heterogeneous agents. ► Shows that competitive steady states with r = n and r < n cannot be Pareto-ranked. ► Identifies the market mechanism responsible for this result. ► As a by-product it shows that the classic result of Stein (1969) is incorrect. ► Implications for social security policy and golden-rule-related problems are drawn.