A two-sector model of endogenous growth with leisure

Antonio Ladrón-De-Guevara, Salvador Ortigueira, Manuel Santos

Research output: Contribution to journalArticle

72 Citations (Scopus)

Abstract

This paper analyses the equilibrium dynamics of an endogenous growth model with physical and human capital in which leisure enters the utility function. The inclusion of leisure introduces a potential source of non-convexities in our optimization problem and leads to the possible existence of multiple balanced growth paths. This multiplicity of optimal stationary solutions is linked to the assumption that education has no effect on the quality of leisure, and hence a relatively more educated economy may choose to grow faster, and devote more time to income-directed activities. To characterize the set of optimal solutions in our non-concave optimization framework we develop a new method of analysis that should be of interest in related applications.

Original languageEnglish (US)
Pages (from-to)609-631
Number of pages23
JournalReview of Economic Studies
Volume66
Issue number3
StatePublished - Jul 1999
Externally publishedYes

Fingerprint

Two-sector model
Endogenous growth
Leisure
Optimal solution
Dynamic equilibrium
Utility function
Income
Multiplicity
Education
Human capital
Endogenous growth model
Non-convexity
Physical capital
Balanced growth path
Optimization problem
Inclusion

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

A two-sector model of endogenous growth with leisure. / Ladrón-De-Guevara, Antonio; Ortigueira, Salvador; Santos, Manuel.

In: Review of Economic Studies, Vol. 66, No. 3, 07.1999, p. 609-631.

Research output: Contribution to journalArticle

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