Indeterminacy in Two-Sector Models of Endogenous Growth with Leisure
AbstractThis paper demonstrates that preference structure may play a pivotal role in generating indeterminacy in the stylized model of endogenous growth. By examining two-sector models of endogenous growth with human capital formation, we show that if the utility function of the representative family is not additively separable between consumption and pure leisure time, indeterminacy may hold even if production technologies satisfy social constant returns. We also examine models with quality leisure in which leisure activities require human capital as well as time. In contrast to the pure-leisure time model, we find that the quality-leisure time model generally needs increasing returns to scale technologies to generate indeterminacy. It is also shown that nonseparability of utility function is crucial for generating indeterminacy in the quality leisure model as well.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 16994.
Date of creation: Apr 2002
Date of revision:
endogenous growth; two-sector models; endogenous labor supply; indeterminacy;
Find related papers by JEL classification:
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
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