Asset bubble and endogenous labor supply: a clarification

Kathia Bahloul Zekkari (1) , Thomas Seegmuller (1)

1 AMSE - Aix-Marseille Sciences Economiques

This paper analyzes the link between asset bubbles, endogenous labor and capital. The question is whether endogenous labor, per se, can explain a crowding-in effect of the bubble, i.e. higher levels of capital and labor. With respect to the existing literature, our contribution is twofold. First, we explicitly and theoretically derive the conditions to have a crowding-in effect of the bubble. Second, the utility function we consider allows us to show that this result does not require an arbitrarily high elasticity of intertemporal substitution in consumption. Our result still holds for a unit value of this elascticity (Cobb-Douglas utility).

Mots clés: Asset bubbles; crowding-in effect; endogenous labor; overlapping generations

Domaines: Economies et finances; Économie et finance quantitative [q-fin]

Kathia Bahloul Zekkari, Thomas Seegmuller. Asset bubble and endogenous labor supply: a clarification. 2020. ⟨hal-02894741⟩