Reference Dependent Preference and Labor Supply: Evidence from China

Guanfu Fang (), Guanliang Hu and Lan Yao ()
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Guanfu Fang: School of Business, Shanghai University of International Business and Economics, Shanghai 201620, China
Guanliang Hu: School of Economics, Shanghai University of Finance and Economics, Shanghai 200433, Chinaa
Lan Yao: School of Economics, Shanghai University of Finance and Economics, Shanghai 200433, China

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2019, vol. 14, issue 2, 264-301

Abstract: This paper investigates the daily labor supply decisions of Hangzhou cabdrivers. We find that Hangzhou cabdrivers' wage elasticity is significantly positive, their working decisions are largely affected by shift time, and crude proxy variables for income; hours targets can hardly explain their working behavior. Nevertheless, Hangzhou cabdrivers are still affected by reference dependent preference. Using new empirical strategies, we show that cabdrivers are more likely to continue working when wage rates are unexpectedly low and more likely to quit when wage rates are unexpectedly high.

Keywords: reference dependent preference; wage elasticity; labor supply; income shock (search for similar items in EconPapers)
JEL-codes: J22 J31 L92 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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