An Economic Model of Work-Related Stress

In this paper we present an economic model of optimal consumption and labour supply where we assume that working may generate stress which affects the well-being of the representative individual. As to stress we posit that it is influenced by cumulated past labour and capital. The latter reflects the fact that work-related stress evolves gradually over time and that it is more likely to occur in modern 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