Abstract
This paper takes a comprehensive study of taxi drivers’ labor supply behavior using a new dataset of taxi drivers from China. We find strong evidence that the working hours of drivers are negatively related to the hourly rates, and this effect is both statistically and economically significant. We then conduct a discrete-choice model, showing that the probability of stopping keeps increasing as cumulative working hours increase, but the probability of stopping first increases and then decreases as the cumulative fare increases. Lastly, we use the asymmetric model with the income target and working hour target as dummy variables, and the probability of stopping is significantly positively related to income target but shows no significant relation with cumulative fare.
Highlights
We find strong evidence that the working hours of drivers are negatively related to the hourly rates, and this effect is both statistically and economically significant
There is a vast of studies in the economic literature focusing on the wage elasticity of labor supply
The neoclassic models of labor supply predict that work hours should respond positively to transitory positive wage changes, as workers intertemporally substitute labor and leisure, working more when wages are high and consuming more leisure when wages are low
Summary
There is a vast of studies in the economic literature focusing on the wage elasticity of labor supply. The neoclassic models of labor supply predict that work hours should respond positively to transitory positive wage changes, as workers intertemporally substitute labor and leisure, working more when wages are high and consuming more leisure when wages are low. While this prediction is straightforward, but it is difficult to find empirical support. The empirical evidence has been surveyed intensively (for example, Blundell and MaCurdy, 1999) and a summary of the findings is that wage elasticities of labor supply are generally very small, often not significantly different from zero, and sometimes even negative One criticism of this literature is that the standard neoclassical models assume. The insignificant or negative wage elasticity of labor supply can plausibly be attributed to specification errors
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