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Technological Progress, the Supply of Hours worked, and the Consumption–Leisure Complemenarity

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  • Andreas Irmen

    (CREA, Université du Luxembourg)

Abstract

At least since 1870 hours worked per worker declined and real wages increased in many of today’s industrialized countries. The dual nature of technological progress in conjunction with a consumption-leisure complementarity explains these stylized facts. Technological progress drives real wages up and expands the amount of available consumption goods. Enjoying consumption goods increases the value of leisure. Therefore, individuals demand more leisure and supply less labor. This mechanism appears in an OLG-model with two-period lived individuals equipped with per-period utility functions of the generalized log-log type proposed by Boppart-Krusell (2016). The optimal plan is piecewise defined and hinges on the wage level. Technological progress moves a poor economy out of a regime with low wages and an inelastic supply of hours worked into a regime where wages increase further and hours worked continuously decline.

Suggested Citation

  • Andreas Irmen, 2017. "Technological Progress, the Supply of Hours worked, and the Consumption–Leisure Complemenarity," DEM Discussion Paper Series 17-23, Department of Economics at the University of Luxembourg.
  • Handle: RePEc:luc:wpaper:17-23
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    File URL: https://hdl.handle.net/10993/34833
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    More about this item

    Keywords

    Technological Change; Capital Accumulation; Endogenous Labor Supply; OLG-model.;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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