AGGREGATION WITH SEQUENTIAL INDIVISIBLE AND CONTINUOUS LABOR SUPPLY DECISIONS AND AN INFORMAL SECTOR

  • Aleksandar VASILEV Independent Researcher, Bulgaria
DOI: https://doi.org/10.14505/tpref.v8.2(16).06

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 official 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 infinity.

References

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[2] Rogerson, R. 1988. Indivisible labor, lotteries and equilibrium. Journal of Monetary Economics 21: 3–16.
[3] Vasilev, A. 2015a. 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, 48: 169-185. DOI: 10.1007/s10644-015-9159-5
[4] Vasilev, A. 2015b. Welfare Effect of Flat Income Tax Reform: The Case of Bulgaria, Eastern European Economics, 53: 205-220. DOI: 10.1080/00128775.2015.1033364
[5] Vasilev, A. 2015c. RBC models and the hours-wages puzzle: puzzle solved! Economia Journal 41: 117-130.
[6] Vasilev, A. 2016a. Aggregation with a mix of indivisible and continuous labor supply decisions: The case of home production, International Journal of Social Economics 43: 1507-1512. Available at: http://dx.doi.org/10.1108/IJSE-04-2015-0098
[7] Vasilev, A. 2016b. Aggregation with sequential non-convex public- and private-sector labor supply decisions, Theoretical and Practical Research in Economics ASERS 14: 173-178. Available at: http://dx.doi.org/10.14505/tpref
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Published
2017-12-31
How to Cite
VASILEV, Aleksandar. AGGREGATION WITH SEQUENTIAL INDIVISIBLE AND CONTINUOUS LABOR SUPPLY DECISIONS AND AN INFORMAL SECTOR. Theoretical and Practical Research in Economic Fields, [S.l.], v. 8, n. 2, p. 144-148, dec. 2017. ISSN 2068-7710. Available at: <https://journals.aserspublishing.eu/tpref/article/view/1562>. Date accessed: 09 july 2025. doi: https://doi.org/10.14505/tpref.v8.2(16).06.
Citation Formats
Issue
Vol 8 No 2 (2017): TPREF, Volume VIII, Issue 2(16), Winter 2017
Section
Articles

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