New York City Cabdrivers’ Labor Supply Revisited: Reference-Dependent Preferences with Rational-Expectations Targets for Hours and Income

37 Pages Posted: 27 May 2011

See all articles by Vincent P. Crawford

Vincent P. Crawford

University of California, San Diego (UCSD) - Department of Economics; University of Oxford - Department of Economics

Juanjuan Meng

Peking University - Guanghua School of Management

Date Written: June 21, 2010

Abstract

This paper proposes a model of cabdrivers’ labor supply, building on Henry S. Farber’s (2005, 2008) empirical analyses and Botond Kőszegi 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 Classification: D03, J22

Suggested Citation

Crawford, Vincent P. and Meng, Juanjuan, New York City Cabdrivers’ Labor Supply Revisited: Reference-Dependent Preferences with Rational-Expectations Targets for Hours and Income (June 21, 2010). Available at SSRN: https://ssrn.com/abstract=1851878 or http://dx.doi.org/10.2139/ssrn.1851878

Vincent P. Crawford

University of California, San Diego (UCSD) - Department of Economics ( email )

Department of Economics
9500 Gilman Drive
La Jolla, CA 92093-0508
United States
302-729-3230 (Phone)

HOME PAGE: http://econweb.ucsd.edu/~v2crawford/

University of Oxford - Department of Economics ( email )

All Souls College
Oxford, Oxfordshire OX1 4AL
United Kingdom
+44-1865-279339 (Phone)

HOME PAGE: http://econweb.ucsd.edu/~v2crawford/

Juanjuan Meng (Contact Author)

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

HOME PAGE: http://www.gsm.pku.edu.cn/faculty_and_research/en/en_teacherDetail.html?crmurl=http://crm.gsm.pku.ed