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

Aleksandar Vasilev

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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.

Keywords: indivisible labor; non-convexities; home production; lotteries; aggregation; discrete-continuous mix (search for similar items in EconPapers)
JEL-codes: E1 J22 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-dcm, nep-dge and nep-ger
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Citations: View citations in EconPapers (4)

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Journal Article: Aggregation with a mix of indivisible and continuous labor supply decisions: the case of home production (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:esprep:142234

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