Daily labor supply and adaptive reference points
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Published version
Date
2021-08
Authors
Tô, Linh T.
Thakral, Neil
Version
Published version
OA Version
Citation
L. Tô, N. Thakral. 2021. "Daily Labor Supply and Adaptive Reference Points." American Economic Review, Volume 111, Issue 8, pp. 2417 - 2443. https://doi.org/10.1257/aer.20170768
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 towards 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.
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