why you can t find a taxi in the rain and other labor supply lessons from cab drivers i replicate and extend the seminal work of camerer et al labor supply of new york city cabdrivers one day at a time quarterly journal of economics 112 1997 407 441 who find that the wage elasticity of daily hours of work for new york city taxi drivers is negative and conclude that their labor supply behavior is consistent with reference dependence in contrast my analysis of the complete record of all trips taken in nyc taxi cabs from 2009 to 2013 shows that drivers tend to respond positively to unanticipated as well as anticipated increases in earnings opportunities additionally using a discrete choice stopping model the probability of a shift ending is strongly positively related to hours worked but at best weakly related to income earned i find substantial heterogeneity across drivers in their elasticities but the estimated elasticities are generally positive and rarely substantially negative i find that new drivers with smaller elasticities are more likely to exit the industry whereas drivers who remain quickly learn to be better optimizers have positive labor supply elasticities that grow with experience these results are consistent with the neoclassical optimizing model of labor supply and suggest that consideration of gain loss utility and income reference dependence is not an important factor in the daily labor supply decisions of taxi drivers jel codes d01 d03 j22

an experimental examination of labor supply and work intensities estimated negative substitution effects on work hours question the empirical validity of the classical labor supply model estimates are reconciled by allowing a dual choice of hours and effort for piecerate workers in such a model these negative substitution effects result from substituting on and off the job leisure we test our model using controlled experimentation on human subjects these experiments while not naturally occurring environments represent real economic choices and can generate data unavailable elsewhere e g effort data the results support our model and they have implications both for labor management and for empirical research focusing only on the hours choice the classical static model of the labor leisure choice offers positive compensated wage effects on hours of work as its main testable implication previous attempts to test this hypothesis with field data have cast doubt on the empirical validity of the static labor supply model due to the frequency of negative estimated compensated wage elasticities a limitation of the model is that it views the choice of hours of work as the only

is tiger woods loss averse persistent bias in the face of experience competition and high stakes although experimental studies have documented systematic decision errors many leading scholars believe that experience competition and large stakes will reliably extinguish biases we test for the presence of a fundamental bias loss aversion in a high stakes context professional golfers performance on the pga tour golf provides a natural setting to test for loss aversion because golfers are rewarded for the total number of strokes they take during a tournament yet each individual hole has a salient reference point par we analyze over 2 5 million putts using precise laser measurements and find evidence that even the best golfers including tiger woods show evidence of loss aversion jel d03 d81 l83

reference dependent preferences and labor supply the case of new york city taxi drivers i develop a model of daily labor supply where preferences are dependent on a reference daily income level and i apply this model to data on the labor supply of new york city taxi drivers i find that there may be a reference level of income on a given day that affects labor supply however there is substantial day to day variation in a given driver s reference level and most shifts end before reaching the reference income level this pattern is inconsistent with an important role for reference dependent preferences

does market experience eliminate market anomalies the case of exogenous market experience a vibrant literature has emerged that suggests willingness to pay and willingness to accept measures of value are quite different for inexperienced consumers but that value differences erode with market experience one potential shortcoming of this literature is that market experience is endogenous this study presents a framed field experiment that exogenously induces market experience empirical findings support the premise that market experience alone can eliminate an important market anomaly

the effect of wage subsidies on piece rate workers evidence from the penny per pound program in florida abstract this paper studies a fair trade program in which consumers provide a wage subsidy bonus to piece rate tomato pickers the total subsidy determined by sales to participating buyers is divided among workers based on their relative output a worker who produces more gets a larger share of the bonus although seemingly mimicking the existing piece rate pay scheme the mechanism associated with the bonus payment is really a relative performance evaluation as the size of total bonus is exogenous and invariant to workers effort therefore for a given sized subsidy the combined total or per worker average utility gains would become the largest if the workers keep their efforts at the pre program level empirical analysis shows that worker effort and hence productivity increases substantially in response to the program suggesting that currently workers combined gains per dollar of subsidy are not being maximized

an empirical analysis of the daily labor supply of stadium venors this paper analyzes the daily labor supply behavior of food and beverage vendors at a single stadium over an entire baseball season this labor market is attractive for the study of labor supply both because ofvendors unilateraly decide whether to participate on each game date and because canges in product demand conditions across days are large and highly predictable generating exogenous game to game variation in the vendor wage i exploit the observable shift in product demand conditions across games to esumate the labor supply participation elasticity of stadium vendors estimates that recognize that demand conditions and vendor labor supply decisions simultancously determine the venofdor wage always find substantial labor supply elasticities typically in the 55 65 range in contract estimates that ignore the endoreneity of the ties these results highlight the imporatance of using demand shift markets

how many pears would a pear packer pack if a pear packer could pack pears at quasi exogenously varying piece rates abstract we examine labor supply using a unique dataset collected from a large pear packing factory pear packers face both expected and unexpected shocks to their wages and we use this to evaluate different models of inter temporal labor supply we find strong evidence for reference dependent preferences but only mixed support for models of rational expectations based targets

does oil move equity prices a global view many studies indicate that oil price shocks have an adverse effect on real output and hence an adverse effect on corporate profits where oil is used as a key input the present study examines whether and to what extent the adverse effect of oil price shocks impacts stock market returns to this end we analyse 35 datastream global industry indices for the period from april 1983 to september 2005 our findings indicate that oil price rises have a negative impact on equity returns for all sectors except mining and oil and gas industries generally these results are consistent with economic theory and evidence provided by previous empirical studies little evidence of any asymmetry is detected in the oil price sensitivities in light of our findings we recommend that international portfolio investors consider hedging oil price risk

the response of worker effort to piece rates we measure the elasticity of worker effort with respect to changes in the piece rate using panel data collected from the payroll records of a british columbia tree planting firm our data contain information on daily worker productivity and the piece rate received over a five month period using a structural model to control for the endogeneity of the piece rate we estimate this elasticity to be approximately 2 14 we also calculate a nonstructural lower bound to this elasticity equal to 0 77 structural estimation also allows us to perform policy experiments and to compare firm profits under alternative compensation systems our results suggest that profits would increase by at least 17 percent were the firm to implement the optimal static contract as predicted by principal agent theory this increase in profits would be due to capturing worker rents after the revelation of private information over ability yet only a negligible proportion of these rents could be captured while inducing workers to reveal ability truthfully suggesting that dynamic considerations were important in determining the firm s actual choice of contract

oil shocks and oil stocks evidence from the 1970s the present paper examines the returns to 29 oil companies listed on the new york stock exchange during the period surrounding the oil shock of 1973 the returns are decomposed into production refining foreign and domestic operations the hypothesis that domestic price controls benefitted refiners is tested finally the hypothesis that oil price risk was priced in the sense of the arbitrage pricing theory is tested

oil and the macroeconomy since world war ii all but one of the u s recessions since world war ii have been preceded typically with a lag of around three fourths of a year by a dramatic increase in the price of crude petroleum this does not mean that oil shocks caused these recessions evidence is presented however that even over the period 1948 72 this correlation is statistically significant and nonspurious supporting the proposition that oil shocks were a contributing factor in at least some of the u s recessions prior to 1972 by extension energy price increases may account for much of post opec macroeconomic performance

crude oil and the macroeconomy tests of some popular notions a note perhaps no other economic events in the post world war ii era have generated as much attention as the series of crude oil price shocks that have jolted the world economy since the opec boycott of 1973 a tremendous amount of space in the popular and professional literature has been devoted to analyzing the impacts of these shocks on the developed economies and the adjustments these shocks have induced one residual of this literature has been a general impression that since 1973 the functional relationship between crude oil prices and the developed macroeconomies has been dramatically and fundamentally altered yet to our knowledge no one has formally tested this impression recent evidence of hamilton 1983 suggests that crude oil prices had a strong impact on the u s business cycle well before 1973 further while textbook treatments of oil price shocks tend to highlight cost push inflationary effects the research of berndt and wood 1975 1979 and wilcox 1983 indicates the net complementarity between energy and capital in the u s economy is quite strong both before and after 1973 thus oil price shocks may have stronger real effects than generally believed in this paper we formally test three popular notions associated with the so called

peers at work we study peer effects in the workplace specifically we investigate whether how and why the productivity of a worker depends on the productivity of coworkers in the same team using high frequency data on worker productivity from a large supermarket chain we find strong evidence of positive productiv ity spillovers from the introduction of highly productive personnel into a shift worker effort is positively related to the productivity of workers who see him but not workers who do not see him additionally workers respond more to the presence of coworkers with whom they frequently interact we conclude that social pressure can partially internalize free riding externalities that are built into many workplaces jel j24 l81 m54

productivity in piece rate labor markets evidence from rural malawi abstract piece rate compensation is a common feature of developing country labor markets but little is known about how piece rate workers respond to incentives or the tradeoffs that an employer faces when setting the terms of the contract in a field experiment in rural malawi we hired casual day laborers at piece rates and collected detailed data on the quantity and quality of their output specifically we use a simplified becker degroot marschak mechanism which provides random variation in piece rates conditional on revealed reservation rates to separately identify the effects of worker selection and incentives on output we find a positive relationship between output quantity and the piece rate and show that this is solely the result of the incentive effect not selection in addition we randomized whether workers were subject to stringent quality monitoring monitoring led to higher quality output at some cost to the quantity produced however workers do not demand higher compensation when monitored and monitoring has no measurable effect on the quality of workers willing to work under a given piece rate together the set of worker responses that we document lead the employer to prefer a contract that offers little surplus to the worker consistent with an equilibrium in which workers have little bargaining power

relationships between oil price shocks and stock market an empirical analysis from china this paper investigates the interactive relationships between oil price shocks and chinese stock market using multivariate vector auto regression oil price shocks do not show statistically significant impact on the real stock returns of most chinese stock market indices except for manufacturing index and some oil companies some important oil price shocks depress oil company stock prices increase in oil volatility may increase the speculations in mining index and petrochemicals index which raise their stock returns both the world oil price shocks and china oil price shocks can explain much more than interest rates for manufacturing index

oil price shocks and the dispersion hypothesis recent research by david lilien shows that a significant fraction of aggregate unemployment can be explained by the dispersion of employment growth across industries this paper presents two new results in this area first it is shown that a significant fraction of the variation in lilien s dispersion index is due to the differential impact of oil shocks across industries second and more important it is shown that once the dispersion in employment growth due to oil shocks is accounted for the residual dispersion has no explanatory power for unemployment

exchange rate fluctuations and immigrants labour market outcomes new evidence from australian household panel data abstract in this paper we exploit plausibly exogenous changes in exchange rates across home countries over time and panel data to identify the causal impact of exchange rate fluctuations on australian immigrants labour market outcomes we present new and robust evidence that unlike immigrants in the us those in australia as a whole do not reduce their yearly labour market outcomes when the local currency appreciates while female immigrants don t adjust their labour activities male immigrants reduce their weekly labour supply and hence earn less when the australian dollar appreciates this work also highlights the importance of controlling for individual heterogeneity as well as gender when modelling the labour market behaviour of immigrants

the provision of incentives in firms i ncentives are the essence of economics despite many wide ranging claims about their supposed importance there has been little empirical assessment of incentive provision for workers the purpose of this paper is to critically overview existing work on the provision of incentives since the interests of workers and their employers are not always aligned a large theoretical literature has emphasized how firms design compensation contracts to induce employees to operate in the firm s interest this literature has reached into many areas of compensation and has pointed to a multitude of different mechanisms that can be used to induce workers to act in the interests of their employers these include piece rates options discretionary bonuses promotions profit sharing efficiency wages deferred compensation and so on my objective here is to evaluate this literature in the light of a growing empirical literature on compensation where possible i will address the literature from two perspectives first an underlying assumption of this literature is that individuals respond to contracts that reward performance accordingly i consider whether agents behave in this way and whether these responses are always in the firm s interest second i address whether firms write contracts with these responses in mind in other words do contracts look like the predictions of the theory incentives are provided to workers

new york city cab drivers labor supply revisited reference dependent preferences with rational expectations targets for hours and income this paper reconsiders whether cabdrivers labor supply decisions reflect reference dependent preferences following botond koszegi and matthew rabin 2006 we construct a model with targets for hours as well as income both determined by rational expectations estimating using henry s farber s 2005 2008 data we show that the reference dependent model can reconcile his 2005 finding that drivers stopping probabilities are significantly related to hours but not income with the negative wage elasticity of hours found by colin camerer et al 1997 and farber 2005 2008 the model yields sensible estimates that avoid farber s 2008 criticism that drivers income targets are too unstable to allow a useful reference dependent model of labor supply

this is what happened to the oil price macroeconomy relationship abstract many of the quarterly oil price increases observed since 1985 are corrections to even bigger oil price decreases the previous quarter when one looks at the net increase in oil prices over the year recent data are consistent with the historical correlation between oil shocks and recessions

the exchange rate exposure of u s multinationals this article examines the exposure of u s multinationals to foreign currency risk evidence is presented that the relationship between stock returns and exchange rates differs systematically across multinationals given these results the study focuses on the determinants of exchange rate exposure the comovements between stock returns and the value of the dollar is found to be positively related to the percentage of foreign operations of u s multinationals copyright 1990 by the university of chicago

oil prices stock markets and portfolio investment evidence from sector analysis in europe over the last decade this article extends the understanding of oil stock market relationships over the last turbulent decade unlike previous empirical investigations which have largely focused on broad based market indices national and or regional indices we examine short term linkages in the aggregate as well as sector by sector levels in europe using different econometric techniques our main findings suggest that the reactions of stock returns to oil price changes differ greatly depending on the activity sector in the out of sample analysis we show that introducing oil asset into a diversified portfolio of stocks allows to significantly improve its risk return characteristics

is tomorrow another day the labor supply of new york city cabdrivers the labor supply of taxi drivers is consistent with the existence of intertemporal substitution my analysis of the stopping behavior of new york city cabdrivers shows that daily income effects are small and that the decision to stop work at a particular point on a given day is primarily related to cumulative daily hours to that point this is in contrast to the analysis of camerer et al who find that the daily wage elasticity of labor supply of new york city cabdrivers is substantially negative implying large daily income effects this difference in findings is due to important differences in empirical methods and to problems with the conception and measurement of the daily wage rate used by camerer et al

exchange rate fluctuations and stability in the oil market abstract this paper attempts to assess the impact of exchange rate fluctuations on the ability of opec to stabilize the oil market since oil prices are denominated in us dollars changes in the exchange rate parity influence the cost of imported oil of major european countries and japan which in turn influences the demand for oil and eventually demand for opec oil these variations become important factors for the stability of the market when opec output is at either maximum or minimum limits of the organization s production capacity

income targeting and farm labor supply there is considerable anecdotal evidence that farm workers who are paid by piece rate tend to income target or work only until they achieve a certain amount of daily income and then stop work we estimate reduced form and structural models derived from the reference dependent preference model of koszegi and rabin 2006 to test the income targeting hypothesis using data from the national agricultural workers survey naws we find evidence that supports the income targeting hypothesis in both the reduced form and structural econometric models our findings suggest that even higher piece rates may not help the widely reported shortage of agricultural labor on the intensive margin as labor supply curves can be backward bending

labor supply of new york city cabdrivers one day at a time life cycle models of labor supply predict a positive relationship between hours supplied and transitory changes in wages because such changes have virtually no effect on life cycle wealth previous attempts to test this hypothesis empirically with time series data have not been supportive estimated elasticities are typically negative or nonsignificant such analyses however are vulnerable to measurement error and other estimation problems we use data on daily observations of wages and hours for new york city cab drivers to estimate the supply response to transitory fluctuations in wages cab drivers decide daily how many hours to supply and face wages that are positively correlated within days but largely uncorrelated between days using these data our central finding is that wage elasticities are persistently negative from 5 to 1 in three different samples even after correcting for measurement error using instrumental variables these negative wage elasticities challenge the notion that cab drivers trade off labor and leisure at different points in time and question the empirical adequacy of life cycle formulations of labor supply

reference points and effort provision a key open question for theories of reference dependent preferences is what determines the reference point one candidate is expectations what people expect could affect how they feel about what actually occurs in a real effort experiment we manipulate the rational expectations of subjects and check whether this manipulation influences their effort provision we find that effort provision is significantly different between treatments in the way predicted by models of expectation based reference dependent preferences if expectations are high subjects work longer and earn more money than if expectations are low

oil prices and economic activity an asymmetric cointegration approach the aim of this paper is to study the long term relationship between oil prices and economic activity proxied by gdp to account for asymmetries existing in the links between the two variables we propose an approach based on asymmetric cointegration our empirical analysis concerns the u s economy but also the g7 europe and euro area economies results indicate that while standard cointegration is rejected there is evidence for asymmetric cointegration between oil prices and gdp

interdependence of oil prices and stock market indices a copula approach article i nfo article history in this paper we study the relationship between the oil price and stock market index of various countries between 1982 and 2007 we exclude oil and gas stock companies from the stock indices to remove the obvious direct linkage oil price series are converted into local currency to account for possible exchange rate effects the method of copula is used to model the general dependence between stock returns and oil price returns our findings suggest a weak dependence between oil prices and stock indices for most cases which are consistent with the results from previous studies exceptions are for the stock index returns of large oil consuming and producing countries united states and canada which are shown to have a relatively strong dependence with the oil price series the introduction of euro in 1999 altered considerably dependence between oil prices and stock returns

do structural oil market shocks affect stock prices abstract this paper investigates how explicit structural shocks that characterize the endogenous character of oil price changes affect stock market returns in a sample of eight countries australia canada france germany italy japan the united kingdom and the united states for each country the analysis proceeds in two steps first modifying the procedure of kilian kilian l forthcoming not all oil price shocks are alike disentangling demand and supply shocks in the crude oil market american economic review we employ a vector error correction or vector autoregressive model to decompose oil price changes into three components oil supply shocks global aggregate demand shocks and global oil demand shocks the last component relates to specific idiosyncratic features of the oil market such as changes in the precautionary demand concerning the uncertainty about the availability of future oil supplies second recovering the oil supply shocks global aggregate demand shocks and global oil demand shocks from the first analysis we then employ a vector autoregressive model to determine the effects of these structural shocks on the stock market returns in our sample of eight countries we find that international stock market returns do not respond in a large way to oil market shocks that is the significant effects that exist prove small in magnitude

contracting out by the public sector theory evidence prospects unlike privatization contracting out or simply contracting does not generally involve the sale of publicly owned assets yet it has been widely used as a mechanism for reform of public sector service provision contracting introduces ex ante competition competition for the market through competitive tendering this article examines both the theory and evidence of contracting by the public sector it considers the theoretical conditions such as contractual incompleteness and the ownership of physical assets which may impede efficient contracting it also reviews the international evidence which suggests that savings in the order of 20 percent are achievable without sacrificing the quality of service provided in the uk savings of between 240m pounds and 280m pounds have been estimated for contracts let at the central government level substantial savings have also been generated by contracting at the local government level copyright 1997 by oxford university press