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Aggregation with sequential indivisible and continuous labor supply decisions and an informal sector

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  • Vasilev, Aleksandar

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 o fficial 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 in finity.

Suggested Citation

  • Vasilev, Aleksandar, 2017. "Aggregation with sequential indivisible and continuous labor supply decisions and an informal sector," EconStor Preprints 168335, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:esprep:168335
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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. Aleksandar Vasilev, 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," Economic Change and Restructuring, Springer, vol. 48(2), pages 169-185, May.
    3. 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.
    4. 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).
    5. Aleksandar Vasilev, 2015. "RBC Models and the Hours-Wages Puzzle: Puzzle Solved!," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 41.
    6. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
    7. 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.
    8. Rogerson, Richard, 1988. "Indivisible labor, lotteries and equilibrium," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 3-16, January.
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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

    Keywords

    Aggregation; Indivisible Labor; Discrete-continuous mix; Informal economy;
    All these keywords.

    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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