Straight-Time and Overtime: A Sequential-Lottery Approach
AbstractThis note explores the problem of aggregation with non-convex labor supply decisions in an economy with both straight time and overtime. In contrast to Hansen and Sargent (1988), the paper models this as a sequential decision. Instead of changing from one to infinity, with a sequential non-convexity, the aggregate elasticity of labor supply for overtime work is a function of overall participation rate, and the aggregate elasticity of labor supply for full-time work depends on the share of workers doing overtime.
 Rogerson, R. 1988. Indivisible Labor, lotteries and equilibrium, Journal of Monetary Economics, 21: 3-16.
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