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Towards an Understanding of Reference-Dependent Labour Supply: Theory and Evidence from a Field Experiment

Author

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  • Steffen Andersen
  • Alec Brandon
  • Uri Gneezy
  • John A List

Abstract

We experimentally study the effects of transitory incentives and income predicted by models of reference-dependent labour supply. Visiting an open-air market in India, we induce experimental variation in: (i) incentives by offering vendors a supplemental wage over the course of two days and (ii) income by, one morning, administering a substantial overpayment for a good sold in the market. We find that incentives have a staggered effect on hours worked: initially vendors do not respond, but by the second day their hours worked increases. In response to the overpayment, we find that both hours worked and a measure of effort are unaffected. Collectively these findings suggest vendors supply their labour according to a model where reference dependence is moderated by experience with an incentive regime or by the time at which income is accumulated.

Suggested Citation

  • Steffen Andersen & Alec Brandon & Uri Gneezy & John A List, 2026. "Towards an Understanding of Reference-Dependent Labour Supply: Theory and Evidence from a Field Experiment," The Economic Journal, Royal Economic Society, vol. 136(673), pages 311-334.
    • Handle: RePEc:oup:econjl:v:136:y:2026:i:673:p:311-334.
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    File URL: http://hdl.handle.net/10.1093/ej/ueaf051
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    Cited by:

    1. is not listed on IDEAS
    2. Omar Al-Ubaydli & John A. List, 2016. "Field Experiments in Markets," NBER Working Papers 22113, National Bureau of Economic Research, Inc.
    3. Achyuta Adhvaryu & Teresa Molina & Anant Nyshadham, 2019. "Expectations, Wage Hikes, and Worker Voice: Evidence from a Field Experiment," NBER Working Papers 25866, National Bureau of Economic Research, Inc.
    4. Joshua D. Angrist & Sydnee Caldwell & Jonathan V. Hall, 2021. "Uber versus Taxi: A Driver's Eye View," American Economic Journal: Applied Economics, American Economic Association, vol. 13(3), pages 272-308, July.
    5. Hiromasa Takahashi & Junyi Shen & Kazuhito Ogawa, 2020. "Gender-specific reference-dependent preferences in the experimental trust game," Evolutionary and Institutional Economics Review, Springer, vol. 17(1), pages 25-38, January.
    6. Dutcher, E. Glenn & Balafoutas, Loukas & Lindner, Florian & Ryvkin, Dmitry & Sutter, Matthias, 2015. "Strive to be first or avoid being last: An experiment on relative performance incentives," Games and Economic Behavior, Elsevier, vol. 94(C), pages 39-56.
    7. Xiqian Cai & jie Gong & Yi Lu & Songfa Zhong, 2018. "Recover Overnight? Work Interruption and Worker Productivity," Management Science, INFORMS, vol. 64(8), pages 3489-3500, August.
    8. Gibson, John & Norton, Douglas A. & White, Robert A., 2019. "The backward hustle: An experimental investigation of tax code notches and labor supply," Journal of Economic Behavior & Organization, Elsevier, vol. 166(C), pages 432-445.
    9. Joshua D. Angrist & Sydnee Caldwell & Jonathan V. Hall, 2017. "Uber vs. Taxi: A Driver’s Eye View," NBER Working Papers 23891, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles

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