Abstract
It is shown that the discrete-time version of the neoclassical one-sector optimal growth model with elastic labor supply and standard monotonicity and convexity assumptions on technology and preferences can have periodic solutions of any period as well as chaotic solutions. The optimality of these non-monotonic solutions is traced back to strong income effects. When technology and preferences are parameterized as it is commonly done in quantitative macroeconomic studies, these phenomena cannot occur.
| Original language | English |
|---|---|
| Pages (from-to) | 55-77 |
| Number of pages | 23 |
| Journal | Economic Theory |
| Volume | 65 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - Jan 2018 |
Austrian Fields of Science 2012
- 502047 Economic theory
Keywords
- CMI
- Cat2
- VWL
- MR
- Optimal growth
- PERIOD-3 CYCLES
- Periodic solutions
- Chaotic dynamics
- Endogenous labor supply
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