American Economic Review Vol. 111 No. 8 2021
Daily Labor Supply and Adaptive Reference Points
Abstract
This paper provides field evidence on how reference points adjust, a degree of freedom in reference-dependence models. Examining this in the context of cabdrivers’ daily labor-supply behavior, we ask how the within-day timing of earnings affects decisions. Drivers work less in response to higher accumulated income, with a strong effect for recent earnings that gradually diminishes for earlier earnings. We estimate a structural model in which drivers work toward a reference point that adjusts to deviations from expected earnings with a lag. This dynamic view of reference dependence reconciles conflicting “neoclassical” and “behavioral” interpretations of evidence on daily labor-supply decisions.
- DOI
- 10.1257/aer.20170768
- Volume
- 111
- Issue
- 8
- Pages
- 2417-2443
- Language
- en
- Sources
- openalex bibtex:phds-export.bib crossref