Aggregation with non-convex labor supply, unobservable effort, and efficiency wages of the no-shirking type

  • Aleksandar Vasilev Independent Researcher

Abstract

The purpose of this note is to explore the problem of non-convex labor supply decision in an economy with imperfect observability of work effort, and the need to use effciency wages to prevent shirking as in Shapiro and Stiglitz 1984. In addition, the paper and explicitly performs the aggregation presented in Vasilev 2017 without a formal proof, and thus provide - starting from micto-foundations - the derivation of the expected utility functions used for the aggregate household. We show how lotteriesĀ as in Rogerson 1988 can be used to convexify consumption sets, and aggregate over individual preferences. With a discrete labor supply decisions, the elasticity of aggregate labor supply increases from unity to infinity.

References

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Published
2018-06-30
How to Cite
VASILEV, Aleksandar. Aggregation with non-convex labor supply, unobservable effort, and efficiency wages of the no-shirking type. Journal of Mathematical Economics and Finance, [S.l.], v. 4, n. 1(6), p. 39 - 52, june 2018. ISSN 2458-0813. Available at: <https://journals.aserspublishing.eu/jmef/article/view/2401>. Date accessed: 22 apr. 2019. doi: https://doi.org/10.14505//jmef.v4.1(6).02.