New York City Cab Drivers' Labor Supply Revisited: Reference-Dependent Preferences with Rational-Expectations Targets for Hours and Income

This paper proposes a model of cab drivers' labor supply, building on Henry S. Farber's (2005, 2008) empirical analyses and Botond Köszegi and Matthew Rabin's (2006; henceforth "KR") theory of reference-dependent preferences. Following KR, our model has targets for hours as...

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Bibliographic Details
Published inThe American economic review Vol. 101; no. 5; pp. 1912 - 1932
Main Authors Crawford, Vincent P., Meng, Juanjuan
Format Journal Article
LanguageEnglish
Published Nashville American Economic Association 01.08.2011
Subjects
Aggregate income
Cities
Earnings
Economic models
Economic theory
Economics
Elasticity of demand
Estimates
Estimation
Hours of work
Income estimates
Income measurement
Labor supply
Labour supply
Loss aversion
Marginal utility
Modeling
Modelling
New York
Probability
Rational expectations
Road transport
Studies
Taxi drivers
Taxicabs
U.S.A
Wages
Work hours
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Summary:This paper proposes a model of cab drivers' labor supply, building on Henry S. Farber's (2005, 2008) empirical analyses and Botond Köszegi and Matthew Rabin's (2006; henceforth "KR") theory of reference-dependent preferences. Following KR, our model has targets for hours as well as income, determined by proxied rational expectations. Our model, estimated with Farber's data, reconciles his finding that stopping probabilities are significantly related to hours but not income with Colin Camerer et al.'s (1997) negative "wage" elasticity of hours; and avoids Farber's criticism that estimates of drivers' income targets are too unstable to yield a useful model of labor supply.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.101.5.1912