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Asset bubble and endogenous labor supply: a clarification

Kathia Bahloul Zekkari () and Thomas Seegmuller ()
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Kathia Bahloul Zekkari: Aix-Marseille Univ, CNRS, AMSE, Marseille, France, https://www.amse-aixmarseille.fr/en/members/bahloul
Thomas Seegmuller: Aix-Marseille Univ, CNRS, AMSE, Marseille, France, https://www.amse-aixmarseille.fr/en/members/seegmuller

No 2026, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: This paper analyzes the link between asset bubbles, endogenous labor and capital. The question is whether endogenous labor, per se, can explain a crowding-in effect of the bubble, i.e. higher levels of capital and labor. With respect to the existing literature, our contribution is twofold. First, we explicitly and theoretically derive the conditions to have a crowding-in effect of the bubble. Second, the utility function we consider allows us to show that this result does not require an arbitrarily high elasticity of intertemporal substitution in consumption. Our result still holds for a unit value of this elascticity (Cobb-Douglas utility).

Keywords: asset bubbles; crowding-in effect; endogenous labor; overlapping generations (search for similar items in EconPapers)
JEL-codes: E22 E44 J22 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2020-07
New Economics Papers: this item is included in nep-dge, nep-mac and nep-upt
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