Are Singaporean Cabdrivers Target Earners?
43 Pages Posted: 11 Oct 2013 Last revised: 27 Mar 2015
Date Written: March 22, 2015
We use a unique administrative dataset of over 10,000 taxi drivers in Singapore to study the labor supply decisions of these drivers. Our study uses a high frequency dataset to test whether cabdrivers exhibit reference-dependence preferences. We estimate cabdrivers’ day and day-of-the-week hours and income targets using ex-post data, and find that the targets have a strong and positive impact on cabdrivers’ probability of stopping work. Cabdrivers with high cumulative hours and/or cumulative income for the day are more likely to stop work earlier when they reach their hour and income targets. We also find that cabdrivers’ income targets are independent of ex-post positive and negative daily income shocks, and that their targeting behavior is persistent. The results support the idea that rational expectations underpin reference-dependence in the labor supply decisions of cabdrivers in our sample.
Keywords: Labor Supply, Reference Dependent Preferences, Cab Drivers
JEL Classification: J22, B49
Suggested Citation: Suggested Citation