HOME PRODUCTION WITH ENDOGENOUS GROWTH

Benhabib et al. (1991) and Greenwood and Hercowitz (1991) demonstrate that general equilibrium Beckerian home production models that incorpo rate separate technology shocks to the home and market production func tions are able to explain either the comovements in employment across consumption and investment sectors of the economy or the comovement in output across market and home investment sectors, but not both simult aneously. This paper demonstrates that these comovements can be resolv ed by introducing endogenous growth into the model, while retaining on ly a single technology shock to market production, The additional marg in for allocating time between formal training and market activities i s sufficient to bring about the observed positive comovements in emplo yment and output across sectors.