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Creating a Learning SocietyA New Approach to Growth, Development, and Social Progress$
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Joseph Stiglitz and Bruce Greenwald

Print publication date: 2014

Print ISBN-13: 9780231152143

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231152143.001.0001

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A Two-Period, N-Good Model with Endogenous Labor Supply

A Two-Period, N-Good Model with Endogenous Labor Supply

(p.286) Chapter Eight A Two-Period, N-Good Model with Endogenous Labor Supply
Creating a Learning Society

Joseph E. Stiglitz

Bruce C. Greenwald

Columbia University Press

This chapter generalizes the results of Chapter 7 to a competitive economy with N goods where labor supply is endogenous. The analysis confirms, qualifies, and generalizes the results derived for the two-sector case. First, it consider a “direct control” problem in which government can determine the amount of labor allocated to each sector. Second, it provides a price interpretation of this optimum. Third, it examines some special features of the symmetric sectors case. Fourth, it analyzes optimal interventions using standard optimal tax theory, asking what taxes and subsidies the government should impose. It shows how the optimum derived under the assumption that there was direct control can be implemented through taxes and subsidies, assuming that government can levy lump sum taxes. Finally, it analyzes government intervention in more realistic contexts, in which government cannot impose such taxes.

Keywords:   competition, competitive economy, labor supply, learning, spillovers, subsidies, government intervention, tax theory, direct control

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