Chen, Been‐LoLee, Shun-FaRaurich, Xavier2021-03-112022-09-152020-061742-7355https://hdl.handle.net/2445/174943This paper studies an infinite‐horizon two‐sector growth model with sector‐specific externalities and preferences that are non‐separable between consumption and leisure. We find two main results. First, a larger income effect on the labor supply increases the possibility of macroeconomic instability. Second, a larger elasticity of the labor supply may increase or decrease the possibility of aggregate instability, depending on the intensity of the income effect.16 p.application/pdfeng(c) The International Association for Economic Theory, 2020Regressió infinitaExternalitats (Economia)Política salarialOferta i demandaElasticitatInfinite regressExternalities (Economics)Wage policySupply and demandElasticityinfo:eu-repo/semantics/article7081112021-03-11info:eu-repo/semantics/openAccess