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Reference dependent preferences and labor supply in historical perspective

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  • MacDonald, Daniel
  • Mellizo, Philip

Abstract

To evaluate voluntary labor supply decisions under transitory monthly piece-rate schedules, we draw from a novel dataset on workers who originated from self-sufficient farms in New Hampshire, Vermont, and Massachusetts, and were recruited into textile mills in eastern Massachusetts in the early 19th century. Where life-cycle models of labor supply predict a positive relationship between labor supply and transitory changes in wages, we instead find negative wage-labor supply elasticities consistent with reference-dependent income targeting. Our findings contribute to the contemporary debate over the empirical validity of competing labor supply models. They also bring into question common modeling conventions in economic history that are used in the construction of historical narratives.

Suggested Citation

  • MacDonald, Daniel & Mellizo, Philip, 2017. "Reference dependent preferences and labor supply in historical perspective," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 69(C), pages 117-124.
    • Handle: RePEc:eee:soceco:v:69:y:2017:i:c:p:117-124
    DOI: 10.1016/j.socec.2017.01.004
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    More about this item

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • N31 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - U.S.; Canada: Pre-1913

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