Hello all,

I would like to add indivisible labor choice as in Chang and Kim (2007) into the model of Krusell and Smith (1998). In Chang and Kim (2007), labor hour is a fixed value (h_bar) or zero, so value function (V) becomes the following equation.

V = Max \{V_{employed}(h=\bar h), V_{unemployed}(h=0)\}.

Since I am using Winberry’s method (local approximation), I am thinking that I cannot directly add indivisible labor choice because the equation above makes the model non-differentiable.

As far as I know, Occbin is usually used to consider zero lower bound or downward nominal wage rigidity. Based on my understanding, Occbin might be used to introduce indivisible labor choice as well. Could you please advise me if it is possible?