This paper presents an open economy model with tradeable and nontradeable sectors in which households cannot supply labour in both sectors at the same time. In this economy, the Frisch elasticity of labour supply is infinite. I analyse how the infinite labour supply elasticity interacts with the...

Indivisible labour is not the only type of nonconvexity affecting labour supply decisions. Another type of nonconvexity arises in economies with sectors whenever individuals can work in only one sector at a time. I introduce this restriction into an open economy model with a tradeable and a...