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Aggregation with two-member households and home production

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  • Vasilev, Aleksandar

Abstract

This note explores the problem of family labor supply decision in an economy with two-member households, joint home production, and fixed cost of joint labor supply. Even though the labor supply decisions are not indivisible per se, the presence of such fixed cost and partners with unequal labor productivity create non-convexities. The note shows how lotteries as in Rogerson (1988) can again be used to convexify consumption sets, and we perform aggregation over individual preferences. The main result demonstrated in the paper is that aggregate preferences of males do not differ from individual level ones. However, for females, the disutility of non-market work at the aggregate becomes separable from market work, but keeps its original (logarithmic) form, while the female labor elasticity of the market hours supply increases from unity to infinity.

Suggested Citation

  • Vasilev, Aleksandar, 2016. "Aggregation with two-member households and home production," EconStor Preprints 142232, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:esprep:142232
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    References listed on IDEAS

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    1. Kydland, Finn E., 1984. "Labor-force heterogeneity and the business cycle," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 21(1), pages 173-208, January.
    2. Cogan, John F, 1981. "Fixed Costs and Labor Supply," Econometrica, Econometric Society, vol. 49(4), pages 945-963, June.
    3. James J. Heckman & Thomas E. Macurdy, 1980. "A Life Cycle Model of Female Labour Supply," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(1), pages 47-74.
    4. MaCurdy, Thomas E, 1981. "An Empirical Model of Labor Supply in a Life-Cycle Setting," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1059-1085, December.
    5. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
    6. Rogerson, Richard, 1988. "Indivisible labor, lotteries and equilibrium," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 3-16, January.
    7. Cho, Jang-Ok & Rogerson, Richard, 1988. "Family labor supply and aggregate fluctuations," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 233-245.
    8. 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.
    9. 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.
    10. Aleksandar Vasilev, 2016. "Aggregation with a mix of indivisible and continuous labor supply decisions," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 43(12), pages 1507-1512, December.
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    More about this item

    Keywords

    family labor supply; home production; aggregation;
    All these keywords.

    JEL classification:

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

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