Equilibrium dynamics in an overlapping generations economy with endogenous labor supply

Abstract

This paper develops a two–period overlapping generation model to examine the behavior of an economy that incorporates endogenous labor–care choice. Assuming a log–linear utility function and a Cobb–Douglas production function, we show that there exists multiple equilibria, comprising a unique trajectory satisfying saddle–path stability and other equilibria, which have an infinite number of converging transition paths.