American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
New York City Cab Drivers' Labor Supply Revisited: Reference-Dependent Preferences with Rational-Expectations Targets for Hours and Income
American Economic Review
vol. 101,
no. 5, August 2011
(pp. 1912–32)
Abstract
This paper proposes a model of cab drivers' labor supply, building on Henry S. Farber's (2005, 2008) empirical analyses and Botond Koszegi 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. (JEL J22, J31, L92)Citation
Crawford, Vincent P., and Juanjuan Meng. 2011. "New York City Cab Drivers' Labor Supply Revisited: Reference-Dependent Preferences with Rational-Expectations Targets for Hours and Income." American Economic Review, 101 (5): 1912–32. DOI: 10.1257/aer.101.5.1912Additional Materials
JEL Classification
- J22 Time Allocation and Labor Supply
- J31 Wage Level and Structure; Wage Differentials
- L92 Railroads and Other Surface Transportation