- Title
- Reference-Dependent Preferences and Labor Supply: The Case of New York City Taxi Drivers
- Author(s)
- Henry S. Farber Henry Farber (Princeton University)
- Abstract
- Recent theoretical work has focused on the importance of reference-dependent preferences. Typically, this work assumes a discontinuity in marginal utility at some base reference level. Marginal utility below this kink in the utility function is higher than marginal utility above the kink. I develop an empirical model of daily labor supply that incorporates reference-dependent preferences, and I apply this model to data on the daily labor supply of New York City taxi drivers. The estimates suggest that there may be a reference level of income on a given day that affects labor supply. However, the reference level varies substantially from day to day for a given driver. This seriously limits the predictive power of the reference point model and undermines the usefulness of the construct of the reference income level as a determinant of labor supply. [JEL classification J22]
- Creation Date
- 2004-12
- Section URL ID
- IRS
- Paper Number
- 497
- URL
- https://dataspace.princeton.edu/bitstream/88435/dsp01zp38wc629/1/497.pdf
- File Function
- Jel
- J22, L92
- Keyword(s)
- marginal utility, empirical model, daily labor supply, taxi drivers
- Suppress
- false
- Series
- 1