Dynamic implications of the wealth-leisure nexus

Date
2022-06
Editor(s)
Advisor
Sağlam, Hüseyin Çağrı
Supervisor
Co-Advisor
Co-Supervisor
Instructor
Source Title
Print ISSN
Electronic ISSN
Publisher
Bilkent University
Volume
Issue
Pages
Language
English
Journal Title
Journal ISSN
Volume Title
Series
Abstract

This thesis analyses a one-sector optimal growth model in which wealth affects the utility obtained from leisure. We consider that an increase in wealth increases the propensity to consume leisure goods and services and hence affects how the instantaneous utility depends on leisure time. We prove the existence of the optimal path and characterize the dynamics and the properties of equilibria. We provide the conditions under which the model has unique or multiple steady states. The intensity of wealth in the utility obtained from leisure and the output elasticity of physical capital play an important role in the number of steady states and in the monotonicity of the optimal path of physical capital. We find that the optimal path of physical capital is monotonic and converges to the unique steady state, provided that the output elasticity of capital is higher than the intensity of wealth in the utility obtained from leisure.

Course
Other identifiers
Book Title
Citation
Published Version (Please cite this version)