This paper studies equilibrium indeterminacy in an extended version of the two-sector endogenous growth model by Mino (1999) by allowing alternative specifications for leisure. When utility depends on pure leisure, indeterminacy may only emerge if consumption and leisure are Edgeworth complements. We obtain the necessary and sufficient conditions for indeterminacy from the arbitrage condition on the two assets of the economy: consumption and human capital. When qualified leisure is considered, indeterminacy does not arise.

This paper studies the macroeconomic effects of a permanent increase in foreign aid in a model that takes into account environmental quality. We develop a dynamic equilibrium model in which both public investment in infrastructure and environmental protection can be financed using domestic resources and international aid programs. The framework considers four scenarios for international aid: untied aid,aid fully tied to infrastructure, aid fully tied to abatement, and aid equally tied to both types of expenditures. We find that the effects of the transfers may depend on (i) the structural characteristics of the recipient country (the elasticity of substitution in production and its dependence on environment and natural resources) and on (ii) how recipient countries distribute their public expenditure. These results underscore the importance of these factors when deciding how and to what extent to tie aid to infrastructure and/or pollution abatement.

In an extended Uzawa-Lucas model that includes labor-leisure decisions, sector-speci c externalities in the production of goods generate a market failure relative to the socially optimal decisions. We show that, regardless of whether agents value pure or effective units of leisure, the first best solution can be attained either by using a time-varying subsidy to the human capital employed to produce goods or by combining consumption and labor income taxes with this type of subsidy. Moreover, when leisure is de ned as raw time, we fi nd that even when there is global determinacy, local indeterminacy may arise for several combinations of the parameters that are consistent with empirical evidence and previous literature. Importantly, under local indeterminacy the optimal policy does not ensure that identical economies will converge to the same per capita levels. Thus, not only the size and type of human capital externalities are important for optimal policy but also the indeterminacy aspects are relevant.

Previous research has shown a strong positive correlation between short-term persistence and long-term output growth as well as between depreciation rates and long-term output growth. This evidence, therefore, contradicts the standard predictions from traditional neoclassical or AK-type growth models with exogenous depreciation. In this paper, we first confirm these findings for a larger sample of 101 countries. We then study the dynamics of growth and persistence in a model that renders a positive link between embodied technological progress, depreciation and output growth. We find that the model's predictions appear consistent with the empirical evidence on persistence, long-term growth and depreciation rates. In addition, we provide evidence of a unit root in output with a large battery of second-generation panel unit root tests. This supports the general validity of the endogenous growth model proposed.

Financial support from the Spanish Ministry of Economy and Competitiveness through grant ECO2012-31626 and Departamento de Educacion, Politica Linguistica y Cultura del Gobierno Vasco (IT869-13) is gratefully acknowledged.

This paper studies whether non-separabilities between consumption and leisure may help to explain the observed persistence in GNP growth. We consider an extended version of Lucas's (1988) human capital investment model that includes labour adjustment costs and compare its performance under different utility specifications with different degrees of complementarity and substitutability between consumption and leisure. We find that when consumption and leisure are complements the model succeeds in matching not only the autocorrelation of output growth but also the important trend-reverting component found in US data. These results hold even if low adjustment costs of labour are considered. Hence, we conclude that an arguably simple margin not considered conventionally can provide useful insights into observed business cycle patterns.

The aim of this paper is to assess the importance of RBC models with endogenous growth in characterizing the observed output dynamics. In particular, this article considers a stochastic version of Lucas' (1988) model in the absence of externalities in discrete time with two modifications: agents do not only derive utility from consumption but also from leisure and labor adjustment costs are included. Results reveal that combining the endogenous character of the engine of growth with labor adjustment costs may help solve the Cogley-Nason (1995) puzzle since, it provides a stronger propagation mechanism and this, in the end, improves the model's ability to generate realistic output dynamics.

. This paper compares the performance of a log-linear method and a parameterized expectations method in solving a dynamic general equilibrium endogenous growth model with human capital. Quantitative evaluation based on second moment statistics shows that the results provided by the two numerical methods are very similar in this framework whenever the propagation mechanism of technology shocks is weak. However, the cross correlations of some relevant variables in the RBC literature obtained from the two methods are significantly different when the model exhibits a strong propagation mechanism. The parameterized expectations method captures the sensitiviness of second moment statistics to the curvature of the utility function while the log-linear method does not.

Este trabajo cuantifica las ganancias derivadas de la cooperación internacional en materia ambiental en un modelo de crecimiento endógeno mediante acumulación de capital humano y analiza los efectos de la cooperación sobre las tasas de crecimiento. El estudio muestra que si la polución se genera mediante acumulación de capital físico los resultados derivados de la cooperación internacional son optimistas dado que la misma no afecta al motor del crecimiento y consigue reducir la polución global, de manera que inequívocamente el nivel de bienestar de los países mejora. Los resultados señalan, además, que cuanto más global es un problema ambiental o cuanto mayor es la preocupación de la sociedad por el mismo, mayores son las ganancias derivadas de la cooperación. Sin embargo, cuanto más contaminante sea la tecnología utilizada por los países, menores serán las ganancias.

This paper analyzes the specific contribution of the external effects of human capital in explaining labor market fluctuations when Lucas’ (1988) endogenous growth model is considered. In particular, this article considers a generalized version of Ozlu’s (1996) stochastic human capital investment model with one modification: human capital externalities are included. It is found that hours worked fluctuate considerably more than productivity and that these externalities provide quantitative improvements in the so called productivity puzzle, since the correlation between output and productivity and between hours worked and productivity are reduced. These correlation results depend on the stochastic properties of human capital shocks, although the higher the size of the externality, the smaller the shock required.

This paper attempts to provide a simple model that generates predictions consistent with cross-country empirical evidence on persistence, long-term growth and capital uti- lization. On the one hand, as documented by Fat as (2000), in a cross section of countries there exists a strong positive correlation between the persistence of short-term uctu-