PUB - Publikationen an der Universität Bielefeld

In this paper we present an economic model of optimal consumption and labor supply where we assume that working may generate stress that affects the well-being of the representative individual. As to stress we posit that it is influenced by cumulated past labor and capital. The latter reflects the fact that work-related stress evolves gradually over time and that it is more likely to occur in modem societies. Using optimal control theory we demonstrate that sustained cycles may result. Further, we numerically compute the global optimal value function and give a representation of the limit cycle. (c) 2006 Elsevier B.V. All rights reserved.