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Do we need more time for leisure?

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  • L. Deidda

    ()

  • F. Cerina

    ()

Abstract

”We need more time - more time for leisure” Linton Kwesi Jonhson used to dub. Indeed, the analysis of an OLG economy with endogenous labor supply gives some rational to the dub poet’s claims. In our setting, the golden rule is defined as the pair of capital-labour ratio and individual labour supply which maximises the steady state utility of each generation. When, other things equal, agents are motivated to work more the higher the level of wages, individual labor supply will be increasing (decreasing) in capital labor ratio according to whether the elasticity of wages per unit of labour is bigger (smaller) than the relative change of the value of the fraction of labour income saved. Hence, if the economy is dynamically efficient, agents tend to work more than in the Golden Age if the propensity to save evaluated at the golden rule is, other things equal, relatively high. Conversely, under dynamic inefficiency, they work too much if and only if the propensity to save is relatively low. For given values of the parameters determining the propensity to save, individuals in dynamic efficient (inefficient) economies work more than in the Golden Age as long as the labour share of income is sufficiently high (low). These findings appear to be of some interest with reference to the 35 hours working-week debate in Europe.

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Bibliographic Info

Paper provided by Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia in its series Working Paper CRENoS with number 200203.

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Date of creation: 2002
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Handle: RePEc:cns:cnscwp:200203

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Related research

Keywords: golden rule; overlapping generations; endogenous labour supply;

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References

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  1. Marimon, R. & Zilibotti, F., 1999. "Employment and Distributional Effects of Restricting Working Time," Economics Working Papers eco99/19, European University Institute.
  2. Andrew Abel & Gregory N. Mankiw & Lawrence H. Summers & Richard Zeckhauser, . "Assessing Dynamic Efficiency: Theory and Evidence," Rodney L. White Center for Financial Research Working Papers 14-88, Wharton School Rodney L. White Center for Financial Research.
  3. Kingston, Geoffrey H., 1999. "Efficient Timing of Retirement," Working Papers 03, University of Sydney, School of Economics.
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  6. Nourry, C., 1998. "Stability of Equilibria in the Overlapping Generations Model with Endogenous Labor Supply," G.R.E.Q.A.M. 98a01, Universite Aix-Marseille III.
  7. Richard Rogerson, 2010. "Indivisible Labor, Lotteries and Equilibrium," Levine's Working Paper Archive 250, David K. Levine.
  8. Duranton, Gilles, 2001. "Endogenous labor supply, growth and overlapping generations," Journal of Economic Behavior & Organization, Elsevier, vol. 44(3), pages 295-314, March.
  9. Tullio Jappelli & Marco Pagano, 1998. "The Welfare Effects of Liquidity Constraints," CSEF Working Papers 13, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  10. John M. Evans & Douglas C. Lippoldt & Pascal Marianna, 2001. "Trends in Working Hours in OECD Countries," OECD Labour Market and Social Policy Occasional Papers 45, OECD Publishing.
  11. Frederic S. Mishkin, 1985. "The Real Interest Rate: A Multi-Country Empirical Study," NBER Working Papers 1047, National Bureau of Economic Research, Inc.
  12. Wolff, Edward N, 1991. "Capital Formation and Productivity Convergence over the Long Term," American Economic Review, American Economic Association, vol. 81(3), pages 565-79, June.
  13. Salvador Ortigueira, 2000. "A dynamic analysis of an endogenous growth model with leisure," Economic Theory, Springer, vol. 16(1), pages 43-62.
  14. Edmond S. Phelps, 1964. "Second Essay on the Golden Rule of Accumulation," Cowles Foundation Discussion Papers 173, Cowles Foundation for Research in Economics, Yale University.
  15. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
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  17. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
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  20. repec:wop:syecwp:9903 is not listed on IDEAS
  21. Martin Feldstein & Lawrence Summers, 1977. "Is the Rate of Profit Falling?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 8(1), pages 211-228.
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Cited by:
  1. G. Marletto, 2006. "La politica dei trasporti come politica per l’innovazione: spunti da un approccio evolutivo," Working Paper CRENoS 200605, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.

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