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When Leisure Becomes Excessive: a Bifurcation Result in Endogenous Growth Theory

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  • Orlando Gomes

    (Escola Superior de Comunicação Social; UNIDE/ISCTE -ERC)

Abstract

The traditional assumption concerning endogenous labor supply in models of economic growth is that utility increases with leisure, independently of the specific time allocation of the representative agent observed at a given moment. In this note, we explore the consequences, over dynamic stability, of assuming that the agent dislikes having free time in excess, i.e., of considering that the marginal utility of leisure is not necessarily positive for every value of the leisure share (in articular, for high values of this share). By including this assumption in a typical AK endogenous growth model, we find that the system will rest, independently of parameter values, on a bifurcation line.

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Article provided by Faculdade de Economia, Universidade de Coimbra in its journal Notas Económicas.

Volume (Year): (2007)
Issue (Month): 26 (December)
Pages: 6-14

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Handle: RePEc:gmf:journl:y:2007:i:26:p:6-14

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  1. Edward L. Glaeser & Bruce I. Sacerdote & Jose A. Scheinkman, 2003. "The Social Multiplier," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 345-353, 04/05.
  2. Salvador Ortigueira, 1997. "A Dynamic Analysis of an Endogenous Growth Model with Leisure," Working Papers 9705, Centro de Investigacion Economica, ITAM.
  3. Ellen R. McGrattan, 1998. "A defense of AK growth models," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 13-27.
  4. Olivier Blanchard, 2004. "The Economic Future of Europe," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 3-26, Fall.
  5. Duranton, Gilles, 2001. "Endogenous labor supply, growth and overlapping generations," Journal of Economic Behavior & Organization, Elsevier, vol. 44(3), pages 295-314, March.
  6. Manuel Gomez, 2003. "Effects of Flat-Rate Taxes: to What Extent Does the Leisure Specification Matter?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(2), pages 404-430, April.
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