International Impact of Productivity Shocks with Endogenous Labor Supply: The Two Large Economy Case

OpenAlex İngilizce

The study constructs a deterministic, overlapping-generations, two-economy model.The analysis is conducted in the context of an infinitely-lived economy where individuals have finite (two-periods) lifetimes.The model shows that a positive productivity shock produces positive correlation between savings and investment despite the fact that there is perfect international capital mobility.Further, the sim ulation results show that the endogeneity o f the labor supply gives rise to cyclical adjustment o f the economy towards its steady state.(JEL Classification: F4) I. IntroductionT his study constructs a determ inistic, overlapping-generations (O LG ), two-economy m odel to explore responses of the two economies to produc