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Expectations-based reference-dependence and labor supply: Eliciting cabdrivers’ expectations in the field

Year: 2025

Type: article

Abstract: This paper reports a field experiment on Shanghai cabdrivers’ labor supply, analyzing the data using an expectations-based reference-dependent model that allows daily income- and hours-targeting. Our main innovation is to elicit the cabdrivers’ income and hours expectations, twice a day. We find that expectations indeed affect labor supply in a way predicted by a reference-dependent model, and hours expectations have a stronger influence than income expectations. Both expectations are found to be correlated with their most recent historical average values. While income expectations do adjust within the day, hours expectations are sticky. The findings suggest that the targeting effect based on hours expectations plays a more important role than traditionally thought.

Source: Journal of Economic Behavior & Organization

DOI: 10.1016/j.jebo.2025.107259

Authors: Vincent P. Crawford, Miao Jin, Juanjuan Meng, Lan Yao

Institutions: University of California San Diego, University of Oxford, Renmin University of China, Peking University, Shanghai University of Finance and Economics

Language: English

Topic: Decision-Making and Behavioral Economics

Subfield: General Decision Sciences

Field: Decision Sciences

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $3,180