Growth and Distribution with Endogenous Leisure Time

This Chapter examines the dynamic interdependence between economic growth and economic structural change with endogenous time distribution and durable consumer goods. It is well known that the traditional neoclassical growth theory has not adequately modeled economic structural change with heterogeneous capital on the basis of microeconomic foundation. This chapter builds a two-sector two-group growth model to examine dynamics of wealth and income distribution with capital accumulation as the main engine of economic growth. The approach is influenced by the neoclassical growth theory as well as by the post-Keynesian theory of growth and distribution. It develops the two-sector two-group model with endogenous wealth accumulation and time distribution between work and leisure. It shows the dynamics and equilibrium of the economic system. It also examines the effects of improvement in the capital goods sector’s productivity, a rise in group \(1\) ’s human capital, and an enhancement in group 2’s propensity to save on the economic system.