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Aggregate Implications of Indivisible Labor

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Author Info
Casey Mulligan (Univ of Chicago)

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Abstract

I suggest that the aggregate implications of indivisible labor are few, and subtle. First, I model behavior in an "indivisible labor" environment like those of Diamond and Mirrlees (1978, 1986), Hansen (1985), Rogerson (1988), Christiano and Eichenbaum (1992) and show how an inverse distribution function describing heterogeneity in the indivisible model is isomorphic with the marginal disutility schedule from the divisible labor model of Lucas and Rapping (1969). It follows that aggregate behavior in such an indivisible model is indistinguishable from aggregates generated by the divisible model; any data on aggregate hours and earnings generated by the divisible (indivisible) model can be generated by a similar parameterization of the indivisible (divisible) model. Second, I generalize the aforementioned models of indivisible labor to allow for labor supply on the "intensive" margin, and to allow for nonlinear taxes. The aggregate implications of doing the former are quite subtle, but doing the latter suggests that the indivisibility of labor may have implications for public finance. My results also imply that backward bending aggregate labor supply, and any nonnegative degree of aggregate intertemporal substitution, are consistent with standard economic theory even when all labor is supplied on the so-called "extensive" margin. Finally, my results suggest that the classic aggregate studies of labor supply by Mincer, Bowen and Finegan, and others have a simple microeconomic interpretation.

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Article provided by Berkeley Electronic Press in its journal Advances in Macroeconomics.

Volume (Year): 1 (2001)
Issue (Month): advances/1/1 ()
Pages: 1007-1007
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Related research
Keywords: indivisible labor labor supply

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Find related papers by JEL classification:
F2 - International Economics - - International Factor Movements and International Business

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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    Other versions:
  3. Rogerson, Richard, 1988. "Indivisible labor, lotteries and equilibrium," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 3-16, January. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Marcelo Bianconi, 2004. "Heterogeneity, Adverse Selection and Valuation with Endogenous Labor Supply," Discussion Papers Series, Department of Economics, Tufts University 0412, Department of Economics, Tufts University. [Downloadable!]
  2. Per Krusell & Toshihiko Mukoyama & Richard Rogerson & Aysegul Sahin, 2008. "Aggregate Implications of Indivisible Labor, Incomplete Markets, and Labor Market Frictions," NBER Working Papers 13871, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. François Gourio & Pierre-Alexandre Noual, 2006. "The Marginal Worker and The Aggregate Elasticity of Labor Supply," Boston University - Department of Economics - Working Papers Series WP2006-009, Boston University - Department of Economics. [Downloadable!]
    Other versions:
  4. Nezih Guner & Remzi Kaygusuz & Gustavo Ventura, 2008. "Taxation, aggregates and the household," Working Papers 660, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  5. Marco Maffezzoli, 2001. "Non-Walrasian Labor Markets and Real Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(4), pages 860-892, October. [Downloadable!] (restricted)
    Other versions:
  6. John Kennan, 2001. "Uniqueness of Positive Fixed Points for Increasing Concave Functions on Rn: An Elementary Result," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(4), pages 893-899, October. [Downloadable!] (restricted)
  7. Michael Dotsey & Robert G. King, 2005. "Pricing, production, and persistence," Working Papers 05-4, Federal Reserve Bank of Philadelphia. [Downloadable!]
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  8. Casey B. Mulligan & Yona Rubinstein, 2004. "Household vs. Personal Accounts of the U.S. Labor Market, 1965-2000," NBER Working Papers 10320, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Yongsung Chang & Sun-Bin Kim, 2003. "From Individual to Aggregate Labor Supply: A Quantitative Analysis Based on a Heterogeneous Agent Macroeconomy," Macroeconomics 0307003, EconWPA. [Downloadable!]
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  10. Richard Rogerson & Johanna Wallenius, 2007. "Micro and Macro Elasticities in a Life Cycle Model With Taxes," NBER Working Papers 13017, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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