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When leisure becomes excessive: a bifurcation result in endogenous growth theory

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  • Gomes, Orlando

Abstract

The traditional assumption concerning endogenous labor supply in models of economic growth is that utility increases with leisure, independently of the specific time allocation of the representative agent observed at a given moment. In this note, we explore the consequences, over dynamic stability, of assuming that the agent dislikes having free time in excess, i.e., of considering that the marginal utility of leisure is not necessarily positive for every value of the leisure share (in particular, for high values of this share). By including this assumption in a typical AK endogenous growth model, we find that the system will rest, independently of parameter values, on a bifurcation line.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 3443.

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Date of creation: Jun 2007
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Handle: RePEc:pra:mprapa:3443

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Keywords: Labor-leisure choice; Leisure utility; Endogenous growth; Dynamic analysis;

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  1. Olivier Blanchard, 2004. "The Economic Future of Europe," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 3-26, Fall.
  2. Salvador Ortigueira, 1997. "A Dynamic Analysis of an Endogenous Growth Model with Leisure," Working Papers 9705, Centro de Investigacion Economica, ITAM.
  3. Ellen R. McGrattan, 1998. "A defense of AK growth models," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 13-27.
  4. Duranton, Gilles, 2001. "Endogenous labor supply, growth and overlapping generations," Journal of Economic Behavior & Organization, Elsevier, vol. 44(3), pages 295-314, March.
  5. E. Glaeser & B. Sacerdote & Jose A. Scheinkman, 2003. "The Social Multiplier," Levine's Working Paper Archive 506439000000000130, David K. Levine.
  6. Manuel Gomez, 2003. "Effects of Flat-Rate Taxes: to What Extent Does the Leisure Specification Matter?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(2), pages 404-430, April.
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