Are preferences for work reference dependent or time nonseparable? New experimental evidence

Abstract

Tests of labor supply models often rely on wages. However, wage variation alone generally cannot disentangle the classical time separable model and its extensions: reference dependent preferences (income targeting) and time nonseparable preferences (disutility spillovers; timing-specific preferences). We set up a novel laboratory experiment in which individuals choose their working time. We vary, independently, wages, historical income paths, and cumulative past work. We also vary the timing of experimental sessions. Statistical tests and stochastic revealed preference methods cannot reject the classical model in favor of income targeting or disutility spillovers, but the data suggest that labor supply varies by time-of-the-day.