Shiro Kuwahara

Both in the steady economic growth of developed countries and in the remarkable economic development of newly industrializing countries in recent years, shorter working hours have been reported. To replicate these phenomena, we develop a model with endogenous technological change and endogenous labor supply. We find that adding increasing returns of research and development efficiency, at least for the small input, yields the economic path accompanying the decreasing labor supply. Furthermore, the path is stable (not saddle stable); therefore, the steady state has multiple paths under rational expectations, which yield local indeterminacy. This reflects the modern economic shocks occurring intermittently in both advanced and emerging countries.