Aggregation with a non-convex labor supply decision and habits in consumption

Aleksandar Vasilev

EconStor Open Access Articles and Book Chapters, 2020, issue forthcoming, 1-6

Abstract: The purpose of this paper is to explore the problem of non-convex labor supply decision in an economy where households feature consumption habits. We show how lotteries as in Rogerson (1988) can again be used to convexify consumption sets, and aggregate over individual preferences. The presence of habits in consumption does not affect the results. As in Hansen (1985) and Rogerson (1988) and no consumption habits, with a discrete labor supply decision at individual level, the elasticity of hours worked at the aggregate level increases from unity to infinity.

Keywords: Aggregation; Indivisible Labor; Consumption Habits; Non-convexities (search for similar items in EconPapers)
JEL-codes: E1 J22 J46 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:espost:224916

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