Labor Supply of New York City Cab Drivers: One Day at a Time
Abstract
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.
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.Attached Files
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Additional details
- Eprint ID
- 80520
- Resolver ID
- CaltechAUTHORS:20170816-154840294
- Created
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2017-08-17Created from EPrint's datestamp field
- Updated
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2019-10-03Created from EPrint's last_modified field
- Caltech groups
- Social Science Working Papers
- Series Name
- Social Science Working Paper
- Series Volume or Issue Number
- 960