Home production with endogenous growth

Benhabib et al. (1991) and Greenwood and Hercowitz (1991) demonstrate that general equilibrium Beckerian home production models that incorporate separate technology shocks to the home and market production functions 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 simultaneously. This paper demonstrates that these comovements can be resolved by introducing endogenous growth into the model, while retaining only a single technology shock to market production, The additional margin for allocating time between formal training and market activities is sufficient to bring about the observed positive comovements in employment and output across sectors.