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Aggregation With Sequential Indivisible And Continuous Labor Supply Decisions And An Informal Sector

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  • Aleksandar VASILEV

    (Independent Researcher, Bulgaria)

Abstract

The purpose of this paper is to explore the problem of non-convex labor supply decision in an economy with both discrete and continuous labor decisions. In contrast to the setup in Vasilev (2016a), here each household faces a sequential labor market choice - an indivisible labor supply choice in the market sector, and conditional on non-working in the official sector, a divisible hours choice in the informal sector. We show how lotteries as in Rogerson (1988) can again be used to convexify consumption sets, and aggregate over individual preferences. With a mix of sequential discrete and continuous labor supply decisions, aggregate disutility of non-market work becomes separable from market work, and the elasticity of the latter increases from unity to infinity.

Suggested Citation

  • Aleksandar VASILEV, 2017. "Aggregation With Sequential Indivisible And Continuous Labor Supply Decisions And An Informal Sector," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 8(2), pages 144-148.
    • Handle: RePEc:srs:jtpref:v:8:y:2017:i:2:p:144-148
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    References listed on IDEAS

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    1. Vasilev, Aleksandar, 2016. "Straight-time and Overtime: A Sequential-Lottery Approach," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 0(1(13)), pages 1-5.
    2. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
    3. Vasilev, Aleksandar, 2015. "Welfare gains from the adoption of proportional taxation in a general-equilibrium model with a grey economy: the case of Bulgaria's 2008 flat tax reform," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 48(2), pages 169-185.
    4. Rogerson, Richard, 1988. "Indivisible labor, lotteries and equilibrium," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 3-16, January.
    5. Vasilev, Aleksandar, 2016. "Aggregation with sequential non-convex public- and private-sector labor suply decisions," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 0(2(14), Wi).
    6. Vasilev, Aleksandar, 2016. "Aggregation with a mix of indivisible and continuous labor supply decisions: the case of home production," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 43(12), pages 1507-1512.
    7. Vasilev, Aleksandar, 2015. "The welfare effect of flat income tax reform: the case of Bulgaria," EconStor Open Access Articles, ZBW - Leibniz Information Centre for Economics, pages 205-220.
    8. Vasilev, Aleksandar, 2015. "RBC Models and the Hours-Wages Puzzle: Puzzle Solved!," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 41, pages 117-130.
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    Cited by:

    1. Vasilev, Aleksandar, 2018. "Insurance-markets Equilibrium with Sequential Non-convex Market-Sector- and Divisible Informal-Sector Labor Supply," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 3(2(5)), pages 19-32.

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    More about this item

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market

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