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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Leibniz Universität Hannover 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)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Salvador Ortigueira, 1997.
"A Dynamic Analysis of an Endogenous Growth Model with Leisure,"
9705, Centro de Investigacion Economica, ITAM.
- Salvador Ortigueira, 2000. "A dynamic analysis of an endogenous growth model with leisure," Economic Theory, Springer, vol. 16(1), pages 43-62.
- Süleyman Basak, .
"On the Fluctuations in Consumption and Market Returns in the Presence of Labor and Human Capital: An Equilibrium Analysis,"
Rodney L. White Center for Financial Research Working Papers
10-98, Wharton School Rodney L. White Center for Financial Research.
- Basak, Suleyman, 1999. "On the fluctuations in consumption and market returns in the presence of labor and human capital: An equilibrium analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 23(7), pages 1029-1064, June.
- Maurice Obstfeld., 1993.
"Risk-Taking, Global Diversification, and Growth,"
Center for International and Development Economics Research (CIDER) Working Papers
C93-016, University of California at Berkeley.
- Maurice Obstfeld, 1992. "Risk-taking, global diversification, and growth," Discussion Paper / Institute for Empirical Macroeconomics 61, Federal Reserve Bank of Minneapolis.
- Maurice Obstfeld, 1995. "Risk-Taking, Global Diversification, and Growth," NBER Working Papers 4093, National Bureau of Economic Research, Inc.
- Obstfeld, Maurice, 1992. "Risk-Taking, Global Diversification, and Growth," CEPR Discussion Papers 688, C.E.P.R. Discussion Papers.
- Caballero, R.J., 1988.
"Consumption Puzzles And Precautionary Savings,"
1988_05, Columbia University, Department of Economics.
- Sandmo, Agnar, 1970. "The Effect of Uncertainty on Saving Decisions," Review of Economic Studies, Wiley Blackwell, vol. 37(3), pages 353-60, July.
- Robert G. King & Sergio T. Rebelo, 2000.
"Resuscitating Real Business Cycles,"
NBER Working Papers
7534, National Bureau of Economic Research, Inc.
- Eaton, Jonathan, 1981. "Fiscal Policy, Inflation and the Accumulation of Risky Capital," Review of Economic Studies, Wiley Blackwell, vol. 48(3), pages 435-45, July.
- Paul M Romer, 1999.
"Increasing Returns and Long-Run Growth,"
Levine's Working Paper Archive
2232, David K. Levine.
- Weil, Philippe, 1993. "Precautionary Savings and the Permanent Income Hypothesis," Review of Economic Studies, Wiley Blackwell, vol. 60(2), pages 367-83, April.
- Garey Ramey & Valerie A. Ramey, 1994.
"Cross-Country Evidence on the Link Between Volatility and Growth,"
NBER Working Papers
4959, National Bureau of Economic Research, Inc.
- Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-51, December.
- Levhari, David & Srinivasan, T N, 1969. "Optimal Savings under Uncertainty," Review of Economic Studies, Wiley Blackwell, vol. 36(106), pages 153-63, April.
- Clemens, Christiane & Soretz, Susanne, 1997. "Welfare Effects of Income Taxation in a Model of Stochastic Growth," Diskussionspapiere der Wirtschaftswissenschaftlichen FakultÃ¤t der Leibniz UniversitÃ¤t Hannover dp-210, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
- Corsetti, Giancarlo, 1997. "A portfolio approach to endogenous growth: equilibrium and optimal policy," Journal of Economic Dynamics and Control, Elsevier, vol. 21(10), pages 1627-1644, August.
- Amilon, Henrik & Bermin, Hans-Peter, 2003. "Welfare effects of controlling labor supply: an application of the stochastic Ramsey model," Journal of Economic Dynamics and Control, Elsevier, vol. 28(2), pages 331-348, November.
- Bodie, Zvi & Merton, Robert C. & Samuelson, William F., 1992.
"Labor supply flexibility and portfolio choice in a life cycle model,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 16(3-4), pages 427-449.
- Zvi Bodie & Robert C. Merton & William F. Samuelson, 1992. "Labor Supply Flexibility and Portfolio Choice in a Life-Cycle Model," NBER Working Papers 3954, National Bureau of Economic Research, Inc.
- Ladron-de-Guevara, Antonio & Ortigueira, Salvador & Santos, Manuel S., 1997.
"Equilibrium dynamics in two-sector models of endogenous growth,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 21(1), pages 115-143, January.
- Antonio Ladron de Guevara & Salvador Ortigueira & Manuel S. Santos, 1994. "Equilibrium Dynamics in Two-Sector Models of Endogenous Growth," Working Papers 9403, Centro de Investigacion Economica, ITAM.
- Christiane Clemens, 2001. "Government Expenditure and Long-Run Stochastic Growth," Computing in Economics and Finance 2001 133, Society for Computational Economics.
- Merton, Robert C, 1969. "Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 247-57, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dietrich, Karl).
If references are entirely missing, you can add them using this form.