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

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  • Colin Camerer
  • Linda Babcock
  • George Loewenstein
  • Richard Thaler

Abstract

Life-cycle models of labor supply predict a positive relationship between hours supplied and transitory changes in wages. We tested this prediction using three samples of wages and hours of New York City cabdrivers, whose wages are correlated within days but uncorrelated between days. Estimated wage elasticities are significantly negative in two out of three samples. Elasticities of inexperienced drivers average approximately −1 and are less than zero in all three samples (and significantly less than for experienced drivers in two of three samples). Our interpretation of these findings is that cabdrivers (at least inexperienced ones): (i) make labor supply decisions "one day at a time" instead of intertemporally substituting labor and leisure across multiple days, and (ii) set a loose daily income target and quit working once they reach that target.

Suggested Citation

  • Colin Camerer & Linda Babcock & George Loewenstein & Richard Thaler, 1997. "Labor Supply of New York City Cabdrivers: One Day at a Time," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 407-441.
  • Handle: RePEc:oup:qjecon:v:112:y:1997:i:2:p:407-441.
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    File URL: http://hdl.handle.net/10.1162/003355397555244
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    1. Shepard, Andrea, 1991. "Price Discrimination and Retail Configuration," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 30-53, February.
    2. Reagan, Patricia B. & Weitzman, Martin L., 1982. "Asymmetries in price and quantity adjustments by the competitive firm," Journal of Economic Theory, Elsevier, vol. 27(2), pages 410-420, August.
    3. West, Kenneth D, 1988. "Asymptotic Normality, When Regressors Have a Unit Root," Econometrica, Econometric Society, vol. 56(6), pages 1397-1417, November.
    4. Severin Borenstein, 1991. "Selling Costs and Switching Costs: Explaining Retail Gasoline Margins," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 354-369, Autumn.
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