A Two-sector Model of Endogenous Growth with Leisure Externalities
AbstractThis paper considers leisure externalities in a Lucas (1988) type model in which physical and human capital are necessary inputs in both sectors. In spite of a non-concave utility, the balanced growth path is always unique in our model which guarantees global stability for comparative-static exercises. We analyze and quantify the effects of preferences toward leisure on labor supply and welfare. We find that small differences in preferences toward leisure can explain a substantial fraction of differences in hours worked between Americans and Europeans. Quantitative results indicate that these differences also explain why Europeans grow less and consume less, but still prefer their lifestyle to that of the United States.
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Bibliographic InfoPaper provided by Institute of Economics, Academia Sinica, Taipei, Taiwan in its series IEAS Working Paper : academic research with number 12-A014.
Length: 27 pages
Date of creation: Dec 2012
Date of revision:
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Web page: http://www.econ.sinica.edu.tw/index.php?foreLang=en
More information through EDIRC
leisure externalities; two-sector model; labor supply; economic growth;
Other versions of this item:
- Azariadis, Costas & Chen, Been-Lon & Lu, Chia-Hui & Wang, Yin-Chi, 2013. "A two-sector model of endogenous growth with leisure externalities," Journal of Economic Theory, Elsevier, vol. 148(2), pages 843-857.
- Costas Azariadis & Been-Lon Chen & Chia-Hui Lu & Yin-Chi Wang, 2012. "A two-sector model of endogenous growth with leisure externalities," Working Papers 2012-045, Federal Reserve Bank of St. Louis.
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
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