Hostname: page-component-745bb68f8f-v2bm5 Total loading time: 0 Render date: 2025-01-22T23:26:56.890Z Has data issue: false hasContentIssue false
  • English
  • Français

Endogenous working hours, overlapping generations, and balanced neoclassical growth

Published online by Cambridge University Press:  17 January 2025

Andreas Irmen Open the ORCID record for Andreas Irmen [Opens in a new window]
Andreas Irmen*
Affiliation:
Department of Economics and Management, University of Luxembourg, Luxembourg, and CESifo, Munich, Germany
*
Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

A balanced growth path that accounts for a decline in hours worked per worker approximates the evolution of today’s industrialized countries since 1870. This stylized fact is explained in an overlapping generations (OLG) model featuring two-period lived individuals equipped with per-period utility functions of the generalized log-log type proposed by Boppart and Krusell (2020) and a neoclassical production sector. Technological progress drives real wages up and expands the amount of consumption goods. The value of leisure increases, and the supply of hours worked declines. Technological progress moves a poor economy out of a regime with low wages and an inelastic supply of hours worked into a regime with high wages and a declining supply of hours worked. The balanced growth path is unique and stable. In the high wage regime, the equilibrium difference equation is available in closed form. A balanced growth path with declining hours worked may also be obtained with endogenous technological progress as in Romer (1986).

Keywords

Technological changecomparative economic developmentendogenous labor supplyneoclassical endogenous growthOLG modelD15J22O33O41
Type
Articles
Information
Macroeconomic Dynamics , First View , pp. 1 - 32
Copyright
© The Author(s), 2025. Published by Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Acemoglu, D. (2009) Introduction to Modern Economic Growth. Princeton, New Jersey: Princeton University Press.Google Scholar
Bick, A., Fuchs-Schuendeln, N. and Lagakos, D.. (2018) How do hours worked vary with income? Cross-country evidence and implications. American Economic Review 108(1), 170–199.CrossRefGoogle Scholar
Bloom, D. E., Canning, D. and Graham, B.. (2003) Longevity and life-cycle savings. Scandinavian Journal of Economics 105(3), 319–338.CrossRefGoogle Scholar
Boppart, T. and Krusell, P.. (2020) Labor supply in the past, present, and future: a balanced-growth perspective. Journal of Political Economy 128(1), 118–157.CrossRefGoogle Scholar
Casey, G. and Horii, R.. (2024) A generalized Uzawa growth theorem. Journal of Political Economy Macroeconomics 2(2), 336–373.CrossRefGoogle Scholar
de la Croix, D. and Michel, P.. (2002) A Theory of Economic Growth — Dynamics and Policy in Overlapping Generations. Cambridge, UK: Cambridge University Press.CrossRefGoogle Scholar
Duranton, G. (2001) Endogenous labor supply, growth and overlapping generations. Journal of Economic Behavior & Organization 44(3), 295–314.CrossRefGoogle Scholar
Gordon, R. J. (2016) The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War. Princeton, New Jersey: Princeton University Press.CrossRefGoogle Scholar
Greenwood, J., Seshadri, A. and Yorukoglu, M.. (2005) Engines of liberation. Review of Economic Studies 72(1), 109–133.CrossRefGoogle Scholar
Grossman, G. M., Helpman, E., Oberfield, E. and Sampson, T.. (2017) Balanced growth despite Uzawa. American Economic Review 107(4), 1293–1312.CrossRefGoogle Scholar
Grossman, G. M., Helpman, E., Oberfield, E. and Sampson, T.. (2021) Endogenous education and long-run factor shares. American Economic Review: Insights 3(2), 215–232.Google Scholar
Herrendorf, B., Rogerson, R. and Valentinyi, A.. (2019) Growth and the Kaldor facts. Federal Reserve Bank of St. Louis Review 101(4), 259–276.Google Scholar
Huberman, M. (2004) Working hours of the world unite? New international evidence of worktime, 1870–1913. The Journal of Economic History 64(04), 964–1001.CrossRefGoogle Scholar
Huberman, M. and Minns, C.. (2007) The times they are not changin’: days and hours of work in old and new worlds, 1870–2000. Explorations in Economic History 44(4), 538–567.CrossRefGoogle Scholar
Iong, K.-K. and Irmen, A.. (2021) The supply of hours worked and fluctuations between growth regimes. Journal of Economic Theory 194, 105239.CrossRefGoogle Scholar
Irmen, A. (2017) Capital- and labor-saving technical change in an aging economy. International Economic Review 58(1), 261–285.CrossRefGoogle Scholar
Irmen, A. (2020) Tasks, technology, and factor prices in the neoclassical production sector. Journal of Economics 131(2), 101–121.CrossRefGoogle Scholar
Irmen, A. (2021) Automation, growth, and factor shares in the era of population aging. Journal of Economic Growth 26(4), 415–453.CrossRefGoogle Scholar
Irmen, A. (2023) Endogenous Working Hours, Overlapping Generations, and Balanced Neoclassical Growth. University of Luxembourg, Department of Economics and Management — Discussion Paper 2023-08.Google Scholar
Kaldor, N. (1961) Capital Accumulation and Economic Growth In: Kaldor, N. (eds.), The Theory of Capital, pp. 177–222. New York: Macmillan & Co. LTD, St. Martin’s Press.CrossRefGoogle Scholar
King, R. G., Plosser, C. I. and Rebelo, S. T.. (1988) Production, growth and business cycles: I. The basic neoclassical model. Journal of Monetary Economics 21(2-3), 195–232.CrossRefGoogle Scholar
Landes, D. S. (1998) The Wealth and Poverty of Nations. New York: W. W. Norton and Company.Google Scholar
Lucas, R. E. and Rapping, L.. (1969) Real wages, employment, and inflation. Journal of Political Economy 77(5), 721–754.CrossRefGoogle Scholar
MaCurdy, T. E. (1981) An empirical model of labor supply in a life-cycle setting. Journal of Political Economy 89(6), 1059–1085.CrossRefGoogle Scholar
McGrattan, E. R. and Rogerson, R.. (2004) Changes in hours worked, 1950–2000. Federal Reserve Bank of Minneapolis, Quarterly Review 28(1), 14–33.Google Scholar
Nourry, C. and Venditti, A.. (2006) Overlapping generations model with endogenous labor supply: general formulation. Journal of Optimization Theory and Applications 128(2), 355–377.CrossRefGoogle Scholar
Ohanian, L., Raffo, A. and Rogerson, R.. (2008) Long-term changes in labor supply and taxes: evidence from OECD countries, 1956–2004. Journal of Monetary Economics 55(8), 1353–1362.CrossRefGoogle Scholar
Prescott, E. C. (1986) Theory ahead of business cycle measurement. Federal Reserve Bank of Minneapolis Quarterly Review 10, 9–22.Google Scholar
Prescott, E. C. (2004) Why do Americans work so much more than Europeans? Federal Reserve Bank of Minneapolis Quarterly Review 28, 2–13.Google Scholar
Ramey, V. A. and Francis, N.. (2009) A century of work and leisure. American Economic Journal: Macroeconomics 1(2), 189–224.Google Scholar
Romer, P. M. (1986) Increasing returns and long-run growth. Journal of Political Economy 94(5), 1002–1037.CrossRefGoogle Scholar
Romer, P. M. (1990) Endogenous technological change. Journal of Political Economy 98(5), S71–S102.CrossRefGoogle Scholar
Weber, M. (1930). The protestant ethic and the spirit of capitalism. reprinted by Routledge Classic 2001, London.Google Scholar