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Indeterminacy and nonlinear dynamics in an OLG growth model with endogenous labour supply and inherited tastes

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  • Luca Gori

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  • Mauro Sodini

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Abstract

This study analyses the dynamics of a two-dimensional overlapping generations economy with endogenous labour supply à la Reichlin (J Econ Theory 40(1):89–102, 1986 ) and aspirations. We show that the degree of nonlinearity of consumption externality in individual utility is responsible for the existence of either one steady state or two steady states. In addition, some interesting global dynamic properties, such as cyclical behaviour and/or global indeterminacy, emerge depending on the relative importance of aspirations in utility. Copyright Springer-Verlag Italia 2014

Suggested Citation

  • Luca Gori & Mauro Sodini, 2014. "Indeterminacy and nonlinear dynamics in an OLG growth model with endogenous labour supply and inherited tastes," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 37(1), pages 159-179, April.
    • Handle: RePEc:spr:decfin:v:37:y:2014:i:1:p:159-179
    DOI: 10.1007/s10203-013-0146-x
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    More about this item

    Keywords

    Aspirations; Indeterminacy; Labour supply; OLG model; Nonlinear dynamics; C61; C62; C68; J22; O41;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium

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