The inclusion of a labour/leisure choice in endogenous growth models has interesting and somewhat counter-intuitive effects. In existing one sector models, a condition for indeterminacy is that labour demand is upward-sloping, which is difficult to reconcile with the evidence. In this paper we give conditions for indeterminacy in a one sector model with decreasing returns to labour. We show that this requires that consumption and leisure are both highly intertemporally substitutable while the factors of production are highly complementary.
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Paper provided by European University Institute in its series Economics Working Papers with number
eco97/11.
Length: 10 pages Date of creation: 1997 Date of revision: Handle: RePEc:eui:euiwps:eco97/11
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Find related papers by JEL classification: D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
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