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Labor Supply of New York City Cab Drivers: One Day At A time

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

Life-cycle models of labor supply predict a positive relationship between hours supplied and transitory changes in wages. The authors 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). Their 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. Coauthors are Linda Babcock, George Loewenstein, and Richard Thaler. Copyright 1997, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Paper provided by California Institute of Technology, Division of the Humanities and Social Sciences in its series Working Papers with number 960.

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Date of creation: Apr 1996
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Publication status: Published: Quarterly Journal of Economics, 1997, V. 112, #2 (May):408-441.
Handle: RePEc:clt:sswopa:960
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