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Labor Supply of New York City Cab Drivers: One Day at a Time

Camerer, Colin F. and Babcock, Linda and Loewenstein, George and Thaler, Richard H. (1996) Labor Supply of New York City Cab Drivers: One Day at a Time. Social Science Working Paper, 960. California Institute of Technology , Pasadena, CA. (Unpublished)

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Life-cycle models of labor supply predict a positive relationship between hours supplied and transitory changes in wages because such changes have virtually no effect on life-cycle wealth. Previous attempts to test this hypothesis empirically with time-series data have not been supportive; estimated elasticities are typically negative or nonsignificant. Such analyses, however, are vulnerable to measurement error and other estimation problems. We use data on daily observations of wages and hours for New York City cab drivers to estimate the supply response to transitory fluctuations in wages. Cab drivers decide daily how many hours to supply, and face wages that are positively correlated within days, but largely uncorrelated between days. Using these data, our central finding is that wage elasticities are persistently negative–from -.5 to -1 in three different samples–even after correcting for measurement error using instrumental variables. These negative wage elasticities challenge the notion that cab drivers trade off labor and leisure at different points in time and question the empirical adequacy of life-cycle formulations of labor supply.

Item Type:Report or Paper (Working Paper)
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URLURL TypeDescription ItemPublished Version
Camerer, Colin F.0000-0003-4049-1871
Additional Information:Please do not circulate or quote without permission. Many thanks to Bruce Schaller (NYC Taxi and Limousine Commission) for data and helpful discussions, James Choi and Dov Rosenberg for research assistance, Keith Weigelt for survey data, John Ham and Charles Brown for helpful discussions, and colleagues at the NBER-Russell Sage Foundation Behavioral Labor Economics meeting, Carnegie Mellon University's Heinz School of Public Policy and Management, the University of California (Irvine and Berkeley) Departments of Economics, the MIT/Harvard Behavioral Economics seminar, the University of Chicago Labor Workshop, the Judgment/Decision Making Society, and the Econometric Society meetings, for helpful comments. Published as Camerer, Colin, Linda Babcock, George Loewenstein, and Richard Thaler. "Labor supply of New York City cabdrivers: One day at a time." The Quarterly Journal of Economics 112, no. 2 (1997): 407-441.
Group:Social Science Working Papers
Series Name:Social Science Working Paper
Issue or Number:960
Record Number:CaltechAUTHORS:20170816-154840294
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:80520
Deposited By: Jacquelyn Bussone
Deposited On:17 Aug 2017 17:04
Last Modified:03 Oct 2019 18:32

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