Growth and Labor Income Risk with Inelastic and Elastic Labor Supply
AbstractWe discuss long-run growth in an economy which is subject to aggregate productivity shocks affecting all factors of production. We demonstrate that the presence of labor income risk unambiguously is an important determinant of long-run expected growth. The issue of dynamic inefficiency of the underlying allocation is related to the size of the risk premium on capital return. The paper also examines the effects distributive disturbances and elastic labor supply, the latter giving rise to the possibility of multiple equilibria.
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Bibliographic InfoPaper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) with number dp-305.
Length: 31 pages
Date of creation: Oct 2004
Date of revision:
income risk; labor supply; endogenous growth;
Find related papers by JEL classification:
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- D9 - Microeconomics - - Intertemporal Choice
- O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-10-21 (All new papers)
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