Journal Article

A Two-Sector Model of Endogenous Growth with Leisure

Antonio Ladrón-de-Guevara, Salvador Ortigueira and Manuel S. Santos

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 66, issue 3, pages 609-631
Published in print July 1999 | ISSN: 0034-6527
Published online July 1999 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/1467-937X.00100
A Two-Sector Model of Endogenous Growth with Leisure

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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.

Journal Article.  0 words. 

Subjects: Economics

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