Non‐separable utilities and aggregate instability

Been‐Lon Chen, Shun‐Fa Lee and Xavier Raurich

International Journal of Economic Theory, 2020, vol. 16, issue 2, 222-237

Abstract: This paper studies an infinite‐horizon two‐sector growth model with sector‐specific externalities and preferences that are non‐separable between consumption and leisure. We find two main results. First, a larger income effect on the labor supply increases the possibility of macroeconomic instability. Second, a larger elasticity of the labor supply may increase or decrease the possibility of aggregate instability, depending on the intensity of the income effect.

Date: 2020
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https://doi.org/10.1111/ijet.12188

Related works:
Working Paper: Non‐separable Utilities and Aggregate Instability (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:ijethy:v:16:y:2020:i:2:p:222-237

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