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Overlapping Generations Model with Endogenous Labor Supply: General Formulation

Author

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  • C. Nourry

    (Université de la Méditerranée and GREQAM)

  • A. Venditti

    (CNRS – GREQAM)

Abstract

This paper develops a one-sector overlapping generations model with endogenous labor supply and nonseparable preferences. It demonstrates that local indeterminacy arises easily under gross substitutability as soon as there exist multiple steady states. We show also that, depending on whether leisure and second-period consumption are gross substitutes, local indeterminacy holds for very different parameter configurations. If gross substitutability is satisfied, the existence of multiple equilibrium paths requires the share of capital in the total income to be strong enough with respect to the elasticity of capital-labor substitution. On the other hand, if gross substitutability is violated, local indeterminacy necessitates the share of capital in the total income to be weak enough with respect to the elasticity of capital-labor substitution.

Suggested Citation

  • C. Nourry & A. Venditti, 2006. "Overlapping Generations Model with Endogenous Labor Supply: General Formulation," Journal of Optimization Theory and Applications, Springer, vol. 128(2), pages 355-377, February.
    • Handle: RePEc:spr:joptap:v:128:y:2006:i:2:d:10.1007_s10957-006-9026-7
    DOI: 10.1007/s10957-006-9026-7
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    5. Grandmont, Jean-Michel & Pintus, Patrick & de Vilder, Robin, 1998. "Capital-Labor Substitution and Competitive Nonlinear Endogenous Business Cycles," Journal of Economic Theory, Elsevier, vol. 80(1), pages 14-59, May.
    6. Benhabib, Jess & Farmer, Roger E.A., 1999. "Indeterminacy and sunspots in macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 6, pages 387-448, Elsevier.
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    Cited by:

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    3. Hippolyte D'Albis & Emmanuelle Augeraud-Veron, 2008. "Endogenous Retirement and Monetary Cycles," Mathematical Population Studies, Taylor & Francis Journals, vol. 15(4), pages 214-229.
    4. Potrafke, Niklas, 2010. "The growth of public health expenditures in OECD countries: Do government ideology and electoral motives matter?," Journal of Health Economics, Elsevier, vol. 29(6), pages 797-810, December.
    5. Luca Gori & Mauro Sodini, 2011. "Nonlinear Dynamics in an OLG Growth Model with Young and Old Age Labour Supply: The Role of Public Health Expenditure," Computational Economics, Springer;Society for Computational Economics, vol. 38(3), pages 261-275, October.
    6. Voosholz, Frauke, 2013. "Inter-generational distribution of resources in a model of economic growth: Taking the land vs. food trade-off into account," CAWM Discussion Papers 70, University of Münster, Münster Center for Economic Policy (MEP).
    7. 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.
    8. Andersen, Torben M. & Bhattacharya, Joydeep, 2013. "Unfunded Pensions And Endogenous Labor Supply," Macroeconomic Dynamics, Cambridge University Press, vol. 17(5), pages 971-997, July.
    9. Anna Agliari & George Vachadze, 2011. "Homoclinic and Heteroclinic Bifurcations in an Overlapping Generations Model with Credit Market Imperfection," Computational Economics, Springer;Society for Computational Economics, vol. 38(3), pages 241-260, October.
    10. Gori, Luca & Sodini, Mauro, 2020. "Endogenous labour supply, endogenous lifetime and economic development," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 238-259.
    11. Carli, Francesco & Lloyd-Braga, Teresa & Modesto, Leonor, 2024. "Imperfect competition in the banking sector and economic instability," Journal of Mathematical Economics, Elsevier, vol. 112(C).
    12. Guido Cazzavillan & Patrick A. Pintus, 2006. "Endogenous business cycles and dynamic inefficiency," International Journal of Economic Theory, The International Society for Economic Theory, vol. 2(3‐4), pages 279-294, September.

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