Daily Labor Supply and Adaptive Reference Points

Neil Thakral and Linh Tô

American Economic Review, 2021, vol. 111, issue 8, 2417-43

Abstract: This paper provides field evidence on how reference points adjust, a degree of freedom in reference-dependence models. Examining this in the context of cabdrivers' daily labor-supply behavior, we ask how the within-day timing of earnings affects decisions. Drivers work less in response to higher accumulated income, with a strong effect for recent earnings that gradually diminishes for earlier earnings. We estimate a structural model in which drivers work toward a reference point that adjusts to deviations from expected earnings with a lag. This dynamic view of reference dependence reconciles conflicting "neoclassical" and "behavioral" interpretations of evidence on daily labor-supply decisions.

JEL-codes: J22 J31 L94 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (28)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/aer.20170768 (application/pdf)
https://doi.org/10.3886/E125682V1 (text/html)
https://www.aeaweb.org/doi/10.1257/aer.20170768.appx (application/pdf)
https://www.aeaweb.org/doi/10.1257/aer.20170768.ds (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:111:y:2021:i:8:p:2417-43

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/aer.20170768

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().