Labor Supply in the Past, Present, and Future: A Balanced Growth Perspective

Abstract:

In this paper we propose a neoclassical theory of labor supply. We revisit the empirical question whether labor supply is constant in the long run. We find that the answer to that question is far from obvious and a decline at constant rate appears to be a reasonable alternative. We then proof a theorem of the most general functional form of balanced growth preferences without restricting long-run hours to be constant. We illustrate some special cases of our utility class and highlight potential applications in which the generalization matters.