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Asset bubble and endogenous labor supply: a clarification

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  • Kathia Bahloul Zekkari

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Thomas Seegmuller

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper analyzes the link between asset bubbles, endogenous labor and capital. The question is whether endogenous labor, per se, can explain a crowding-in effect of the bubble, i.e. higher levels of capital and labor. With respect to the existing literature, our contribution is twofold. First, we explicitly and theoretically derive the conditions to have a crowding-in effect of the bubble. Second, the utility function we consider allows us to show that this result does not require an arbitrarily high elasticity of intertemporal substitution in consumption. Our result still holds for a unit value of this elascticity (Cobb-Douglas utility).

Suggested Citation

  • Kathia Bahloul Zekkari & Thomas Seegmuller, 2020. "Asset bubble and endogenous labor supply: a clarification," Working Papers hal-02894741, HAL.
    • Handle: RePEc:hal:wpaper:hal-02894741
    Note: View the original document on HAL open archive server: https://amu.hal.science/hal-02894741
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    References listed on IDEAS

    as
    1. Alberto Martin & Jaume Ventura, 2012. "Economic Growth with Bubbles," American Economic Review, American Economic Association, vol. 102(6), pages 3033-3058, October.
    2. Raurich, Xavier & Seegmuller, Thomas, 2019. "On the interplay between speculative bubbles and productive investment," European Economic Review, Elsevier, vol. 111(C), pages 400-420.
    3. Casey B. Mulligan, 2002. "Capital, Interest, and Aggregate Intertemporal Substitution," NBER Working Papers 9373, National Bureau of Economic Research, Inc.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Asset bubbles; crowding-in effect; endogenous labor; overlapping generations;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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