Flexible Work Hours and Dynamic Labor Supply: Evidence from Taxi Drivers

36 Pages Posted: 1 Jan 2018 Last revised: 29 Apr 2019

See all articles by Nicholas Buchholz

Nicholas Buchholz

Princeton University Department of Economics

Matthew Shum

California Institute of Technology

Haiqing Xu

Department of Economics, University of Texas at Austin

Date Written: March 20, 2018

Abstract

We estimate an optimal stopping model for taxicab drivers' labor supply decisions, using a large sample of shifts for drivers of New York City taxicabs. Our results show that both ``behavioral'' and ``neoclassical'' wage responses are present in the data, with the behavioral income-targeting story explaining shorter shifts, and the standard neoclassical model explaining longer shifts. Hence these findings partially reconcile the divergent reduced-form results in the existing literature. A methodological contribution of this paper is to develop a new closed-form estimator for dynamic discrete choice models in a semiparametric setting, in which the distribution of utility shocks is left unspecified.

Keywords: Dynamic discrete choice model, Closed form estimator, Optimal stopping, Taxicab industry, Labor supply, Negative wage elasticities, Semiparametric average derivative estimation

JEL Classification: C14, D91, C41, L91

Suggested Citation

Buchholz, Nicholas and Shum, Matthew and Xu, Haiqing, Flexible Work Hours and Dynamic Labor Supply: Evidence from Taxi Drivers (March 20, 2018). Available at SSRN: https://ssrn.com/abstract=2748697 or http://dx.doi.org/10.2139/ssrn.2748697

Nicholas Buchholz

Princeton University Department of Economics ( email )

Joseph Henry House
Princeton, NJ 08542
United States

Matthew Shum (Contact Author)

California Institute of Technology ( email )

Pasadena, CA 91125
United States

Haiqing Xu

Department of Economics, University of Texas at Austin ( email )

Austin, TX 78712
United States

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