Rural Infrastructure and its Implication to Labor Market Participation in Jimma Zone, South-West Ethiopia

Rural economy remain the back bone of Ethiopian economy absorbing tremendous labor share while how these labor market behave in rural economy of Ethiopia is yet uncovered. Besides the appreciated role of rural access to basic infrastructure with reference to rural labor supply decision, the topic is not bold in domestic literature. Considering this inadequate attention to the topic, we tried to examine the impact of rural infrastructure provision on individual labor supply, and assess the implication with each component of rural services to household participation decision in the labor market, using household survey from Jimma zone. Our multinomial logit regression indicated that rural services like education, health, credit, market information and access to all-weather-road are important considerations with regard to individual labor supply decision in farm and off-farm activities. It would be better to enhance rural access to efficient agricultural extension as well as other basic services towards empowering rural livelihood, and ensuring economic transformation at large.

Insurance-markets Equilibrium with a Non-convex Labor Supply decision, Unobservable Effort, and Incentive ("Fair") Wages

The purpose of this note is to describe the lottery- and insurance-market equilibrium in an economy with non-convex labor supply decision, unobservable effort, and incentive ("fair") wages. The presence of indivisible labor creates a market incompleteness, which requires that an insurance market for employment be put in operation to "complete" the market.

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

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 lotteries 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.

Optimal pensions in aging economies

We derive the optimal replacement ratio of the pay-as-you-go public pension system for the US economy in a life-cycle model that 1) replicates the empirical wage heterogeneity and 2) endogenizes the individual’s labor supply decision. The optimal net pension replacement ratio is found to be in the range of 0%–43% depending on demographic parameters and, in particular, the Frisch labor supply elasticity. Reducing the pensions from the present to the optimal pension policies implies considerable welfare gains amounting to approximately 0.1%–4.1% of total consumption. The welfare increase is particularly pronounced for the greyer US population that is projected for the time after the demographic transition.

Aggregation with a mix of indivisible and continuous labor supply decisions

Purpose 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 McGrattan et al. (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. Design/methodology/approach The authors show how lotteries as in Rogerson (1988) can again be used to convexify consumption sets, and aggregation over individual preferences. Findings 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. Research limitations/implications As a possible venue for future research, the authors plan to feed the derived aggregate utility function above in a sophisticated real-business-cycle model to investigate the effect of those preferences for the transmission of technology and fiscal shocks. Originality/value This is a novel and interesting result in the aggregation literature.