A MODIFIED NEOCLASSICAL GROWTH MODEL WITH ENDOGENOUS LABOR PARTICIPATION
In light of robust econometric results on the determinants of labor participation in 36 advanced economies reported by Grigoli et al. (2018) and independently by CBO (2018), my paper modifies the Solow (1956) - Swan (1956), or S-S, growth model by making endogenous the rate of labor participation (exogenously fixed at a constant fraction of population in the S-S model). By allowing a fully adjusting natural rate, I find that the positive growth effects of a higher saving rate hold in the transition to and in the steady state (a generalization of the S-S model).
Agenor, P. (2004). The Economics of Adjustment and Growth. Harvard University Press, Cambridge, MA.
Aghion, P., and Howitt, P. (1998). Endogenous Growth Theory. MIT Press, Cambridge, MA.
Arrow, K. (1962). The Economic Implications of Learning by Doing. Review of Economic Studies, 29, 155-173.
Congressional Budget Office. (2018). CBO’s Projection of Labor Force Participation Rates. Working Paper No. 2018-04, March 16.
Conlisk, J. (1967). A Modified Neoclassical Growth Model with Endogenous Technical Change. Southern Economic Journal, 34, 199-208.
Domar, E. (1946). Capital Expansion, Rate of Growth, and Employment. Econometrica, 14, 137-147.
Grigoli, F., Koczan, Z. and Tapalova, P. (2018). Drivers of Labor Participation: Macro and Micro Evidence. International Monetary Fund Working Paper. WP/18/150. Washington, D.C.
Grossman, G., and Helpman, E. (1991). Innovation and Growth in the Global Economy. MIT Press, Cambridge, MA.
Harrod, R. (1939). An Essay in Dynamic Theory. The Economic Journal, 49, 14-33.
Inada, K-I. (1963). On a Two-Sector Model of Economic Growth: Comments and Generalization. Review of Economic Studies, 30, 119-127.
Lucas, R. (1988). On The Mechanics of Economic Development. Journal of Monetary
Economics, 22, 3-42.
Nelson, R., and Phelps, E. (1966). Investment in Humans, Technological Diffusion, and Economic Growth. American Economic Review, 56, 69-75.
Rebelo, S. (1991). Long-Run Policy Analysis and Long-Run Growth. Journal of Political Economy, 99, 500-21.
Romer, P. (1986). Increasing Returns and Long-Run Growth. Journal of Political Economy, 94, 1002-37.
Romer, P. (1990). Endogenous Technical Change. Journal of Political Economy, 98, s71-s102.
Solow, R. (1956). A Contribution to the Theory of Economic Growth. Quarterly
Journal of Economics, 70, 65-94.
Solow, R. (1987). Growth Theory and After. Nobel Prize Lecture, December 8.
Solow, R. (1991). Policies for Economic Growth. Ernest Sturc Memorial Lecture. SAIS, Johns Hopkins University. November 12.
Swan, T. (1956). Economic Growth and Capital Accumulation. Economic Record, 32, 334-362.
Villanueva, D. (1994). Openness, Human Development and Fiscal Policies. IMF Staff Papers, 41, 1-29.
Warsh, D. (2007). Knowledge and the Wealth of Nations: A Story of Economic Discovery. W.W. Norton and Company, New York.
Copyright (c) 2020 Buletin Ekonomi Moneter dan Perbankan
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Buletin Ekonomi Moneter dan Perbankan / Bulletin of Monetary Economics and Banking is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.