Chapter 12 - Labour supply analysis of ride-sourcing services

Abstract

The popularity of ride-sourcing services enables drivers working as freelancers on ride-sourcing platforms to have flexible schedules; that is, drivers can make daily decisions regarding whether to work, and if so, for how many hours. As these participation and working-hour decisions are affected by factors such as driver income, it is important to evaluate how the labour supply of a platform is influenced by its hourly income rate. In this chapter, we present an econometric framework with closed-form measures that can be used for estimating the participation elasticity (i.e., extensive margin elasticity) and working-hour elasticity (i.e., intensive margin elasticity) of labour supply on a platform. Moreover, we exploit a natural experiment on a ride-sourcing platform to identify a driver incentive that we denote an income multiplier, which serves as an exogenous shock and an instrumental variable. We empirically analyse the effects of hourly income rates on labour supply along both the extensive and intensive margins. We find that the participation elasticity and working-hour elasticity of labour supply are positive and significant in the dataset of this ride-sourcing platform.