Anticipated Income Shock and Labor Supply

38 Pages Posted: 26 Jul 2017 Last revised: 4 Aug 2018

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Shih-Fen Cheng

Singapore Management University - School of Information Systems

Jussi Keppo

National University of Singapore - NUS Business School

Kang Mo Koo

Deakin University-Department of Finance

Date Written: July 30, 2018

Abstract

We examine the impact of an anticipated income shock on Singaporean taxi labor supply. This income shock is due to a government provision allowing employees to withdraw part of their pension savings at the age of 55. The results show that salary income, number of trips, total hours worked, and active hours worked decrease after drivers reach age 55 by 3.5%, 3.2%, 1.6%, and 3.1%, respectively. The impact on labor supply is more marked right after drivers reach age 55, and the response is stronger among those with higher education or with lower salary income. Moreover, we find that the anticipated income shock decreases the extensive margin by 5.79%.

Keywords: Income shock, labor supply, pension withdrawal, taxi, intensive margin, extensive margin

JEL Classification: D1, H2, R4, R5

Suggested Citation

Agarwal, Sumit and Cheng, Shih-Fen and Keppo, Jussi and Koo, Kang Mo, Anticipated Income Shock and Labor Supply (July 30, 2018). Available at SSRN: https://ssrn.com/abstract=3006631 or http://dx.doi.org/10.2139/ssrn.3006631

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Shih-Fen Cheng

Singapore Management University - School of Information Systems ( email )

80 Stamford Road
Singapore, 178902
Singapore

HOME PAGE: http://www.mysmu.edu/faculty/sfcheng/

Jussi Keppo

National University of Singapore - NUS Business School ( email )

1 Business Link
Singapore, 117592
Singapore

Kang Mo Koo (Contact Author)

Deakin University-Department of Finance ( email )

221 Burwood Highway
Burwood, Victoria
Australia

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