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Aggregation with a mix of indivisible and continuous labor supply decisions: the case of home production

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  • Vasilev, Aleksandar

Abstract

This note explores the problem of non-convex labor supply decision in an economy with both discrete and continuous labor decisions. In contrast to the setup in Mc-Grattan, Rogerson and Wright (1997), here each household faces an indivisible labor supply choice in the market sector, while it can choose to work any number of hours in the non-market sector. We show how lotteries as in Rogerson (1988) can again be used to convexify consumption sets, and aggregation over individual preferences. With a mix of discrete and continuous labor supply decisions, disutility of non-market work becomes separable from market work, and the elasticity of the latter increases from unity to infinity.

Suggested Citation

  • 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.
    • Handle: RePEc:zbw:espost:146529
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    References listed on IDEAS

    as
    1. Rogerson, Richard, 1988. "Indivisible labor, lotteries and equilibrium," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 3-16, January.
    2. McGrattan, Ellen R & Rogerson, Richard & Wright, Randall, 1997. "An Equilibrium Model of the Business Cycle with Household Production and Fiscal Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 267-290, May.
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    Cited by:

    1. Aleksandar VASILEV, 2017. "Aggregation With Two-Member Households And Home Production," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 8(1), pages 73-77.
    2. 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.
    3. 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.
    4. Aleksandar Vasilev, 2015. "RBC Models and the Hours-Wages Puzzle: Puzzle Solved!," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 41.

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    More about this item

    Keywords

    Indivisible labor; home production; non-convexities; lotteries; discrete-continuous mix; aggregation;
    All these keywords.

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models

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