Labor Supply and Human Capital in a Three-Sector Growth Model

This paper introduces endogenous time distribution between work and leisure into a three-sector growth theory. The economy consists of capital goods sector, consumption goods sector, and university. Knowledge is created through learning by doing and research. Time distribution between leisure and work is endogenously determined. The model is a synthesis of the Uzawa two-sector model, the Uzawa-Lucas two-sector model, and Arrow’s learning-by-doing models. First, we define the three-sector growth model with an alternative approach to consumer behaviour with endogenous knowledge, capital and labour supply. Then, we examine dynamic properties of the model. We also simulate the model and demonstrate effects of changes in some parameters