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Reference Dependent Preference and Labor Supply: Evidence from China

Author

Listed:
  • 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)

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.

Suggested Citation

  • Guanfu Fang & Guanliang Hu & Lan Yao, 2019. "Reference Dependent Preference and Labor Supply: Evidence from China," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 14(2), pages 264-301, June.
    • Handle: RePEc:fec:journl:v:14:y:2019:i:2:p:264-301
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    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-008-019-0013-8
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    Citations

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    Cited by:

    1. Li Qian, 2020. "Dynamic effects of consumption tax reforms with durable consumption," The B.E. Journal of Macroeconomics, De Gruyter, vol. 20(2), pages 1-33, June.

    More about this item

    Keywords

    reference dependent preference; wage elasticity; labor supply; income shock;
    All these keywords.

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation

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