When leisure becomes excessive: a bifurcation result in endogenous growth theory

Abstract

The traditional assumption concerning endogenous labor supply in models of economic growth is that utility increases with leisure, independently of the specific time allocation of the representative agent observed at a given moment. In this note, we explore the consequences, over dynamic stability, of assuming that the agent dislikes having free time in excess, i.e., of considering that the marginal utility of leisure is not necessarily positive for every value of the leisure share (in particular, for high values of this share). By including this assumption in a typical AK endogenous growth model, we find that the system will rest, independently of parameter values, on a bifurcation line.