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

individual heterogeneity and cultural attitudes in credence goods provision abstract i study the heterogeneity of credence goods provision in taxi drivers taking detours in new york city first i document that there is significant detouring on average by drivers second there is significant heterogeneity in detouring across individuals yet each individual s propensity to take detours is stable drivers who detour almost always detour while those who do not detour almost never do drivers who take longer detours on each trip also take such trips more often third cultural attitudes plausibly explain some of this heterogeneity in behavior across individuals

a model of entry exit decisions and capacity choice under demand uncertainty abstract many investment decisions of agribusiness firms such as when to invest in an emerging market or whether to expand the capacity of the firm involve irreversible investment and uncertainty about demand cost or competition this paper uses an option value model to examine the factors affecting an agribusiness firm s decision whether and how much to invest in an emerging market under demand uncertainty demand uncertainty and irreversibility of investment make investment less desirable than the net present value npv rule indicates the inactive firm is more reluctant to enter the market when it takes into account demand uncertainty because it preserves the opportunity of making a better investment later the active firm is more reluctant to abandon the investment because there is an option value of keeping the operation alive there is a greater distance between the entry and exit thresholds under the option value approach than under the npv rule due to demand uncertainty the results have implications for agribusiness decision making

analyzing the extent and influence of occupational licensing on the labor market this study examines occupational licensing in the united states using a specially designed national labor force survey estimates from the survey indicated that 35 of employees were either licensed or certified by the government and that 29 were licensed another 3 stated that all who worked in their job would eventually be required to be certified or licensed bringing the total that are or eventually must be licensed or certified by government to 38 we find that licensing is associated with about 18 higher wages but that the effect of governmental certification on pay is much smaller

when to quit narrow bracketing and reference dependence in taxi drivers abstract taxi drivers provide an ideal setting for testing various models of labor supply despite this the literature studying driver behavior has produced mixed evidence of which labor supply model best applies to driver labor supply using a novel analysis and large datasets of taxi trips from two different cities this paper provides a unifying analysis which reconciles previous inconsistencies in evidence for reference dependence in taxi drivers by testing for a particular non linear relationship between shift income and drivers hazard of stopping i identify behavior that is consistent with prospect theoretic s shaped reference dependence as opposed to the more extensively examined loss aversion model of reference dependence this particular model of reference dependence in this setting allows me to estimate individual driver reference points without an explicit functional form or ex ante assumptions about the existence of a reference point

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

a shred of credible evidence on the long run elasticity of labor supply all public policies regarding taxation and the redistribution of income rely on assumptions about the long run effect of wages rates on labour supply the variation in existing estimates calls for a simple natural experiment in which men can change their hours of work and in which wages have been exogenously and permanently changed we use a panel dataset of taxi drivers who choose their own hours and who experienced two exogenous permanent fare increases and estimate an elasticity of labour supply of 0 2 implying that income effects dominate substitution effects in the long run labour supply of males

market power in emission permit markets theory and evidence from the eu ets a well known result about market power in emission permit markets is that efficiency can be achieved by full free allocation to the dominant firm i show that this result breaks down when taking the interaction between input and output markets into account even if the dominant firm perceives market power in the permit market alone i then examine the empirical evidence for price manipulation by the ten largest electricity firms during phase i of the eu ets i find that some firms excess allowance holdings are consistent with strategic price manipulation and that they cannot be explained by price speculation or by precautionary purchases to insure against uncertain future emissions my results suggest that market power is likely to be an empirically relevant concern during the early years of emission permit markets

market power permit allocation and efficiency in emission permit markets market power in permit markets has been examined in some detail following the seminal work of hahn q j econ 99 4 753 765 1984 but the effect of free allocation on price manipulation with market power in both product and permit market has not been fully addressed i show that in this case the threshold of free allocation above which a dominant firm will set the permit price above its marginal abatement costs is below its optimal emissions in a competitive market and that overall efficiency cannot be achieved by means of permit allocation alone in addition to being of general economic interest this issue is relevant in the context of the eu ets i find that the largest german uk and nordpool power generators received free allowances in excess of the derived threshold conditional on having price setting power in both the electricity and permit markets these firms would have found it profitable to manipulate the permit price upwards despite being net permit buyers

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

the effect of unions on the structure of wages a longitudinal analysis this paper studies the effects of unions on the structure of wages using an estimation technique that explicitly accounts for misclassification errors in reported union status and potential correlations between union status and unobserved productivity the econometric model is estimated separately for five skill groups using a large panel data set formed from the u s current population survey the results suggest that unions raise wages more for workers with lower levels of observed skills in addition the patterns of selection bias differ by skill group among workers with lower levels of observed skill unionized workers are positively selected whereas union workers are negatively selected from among those with higher levels of observed skill despite a large and sophisticated literature there is still substantial disagreement over the extent to which differences in the structure of wages between union and nonunion workers represent an effect of trade unions rather than a consequence of the nonrandom selection of unionized workers over the past decade several alternative approaches have been developed to control for unobserved heterogeneity between union and nonunion workers 2 one method that has been successfully applied in other areas of applied microeconometrics is the use of longitudinal data to measure the wage gains or losses of workers who change union status unfortunately longitudinal estimators are highly sensitive to measurement error even a small fraction of misclassified union status changes can lead to significant biases if the true rate of mobility between union and nonunion jobs is low this sensitivity led lewis 1986 to essentially dismiss the longitudinal evidence in his landmark survey of union wage effects in this paper i present some new evidence on the union wage effect based on a longitudinal estimator that explicitly accounts for misclassification errors in reported union status the estimator uses external information on union status misclassification rates along with the reduced form coefficients from a multi variate regression of wages on the observed sequence of union status indicators to isolate the causal effect of unions from any selection biases introduced by a correlation between union status and the permanent component of unobserved wage heterogeneity recognizing that unions may raise wages more or less for

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

incorporating stochastic variables in crop response models implications for fertilization decisions most crop decision models focus on output variation in response to nonstochastic inputs little attention has been given to the effects of stochastic factors on the input use decision a crop decision model is developed to examine the impact of soil moisture on the nitrogen fertilization decision the model is applied to 15 different soil and weather conditions for corn production in indiana based on estimated response functions the profit maximizing nitrogen application rate varies from 156 to 185 pounds of actual nitrogen n per acre we evaluate the expected economic losses arising from applying to one set of conditions a rate deemed optimal for another

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

wage elasticities in working and volunteering the role of reference points in a laboratory study we experimentally test how effort responds to wages randomly assigned to accrue to individuals or to a charity in the presence of expectations based reference points or targets when individuals earn money for themselves higher wages lead to higher effort with relatively muted targeting behavior when individuals earn money for a charity higher wages instead lead to lower effort with substantial targeting behavior a reference dependent theoretical framework suggests an explanation for this differential impact when individuals place less value on earnings such as when accruing earnings for a charity instead of themselves more targeting behavior and a more sluggish response to incentives should result results from an additional experiment add support to this explanation when individuals select into earning money for a charity and thus likely place a higher value on those earnings targeting behavior is muted and no longer generates a negative effort response to higher wages data and the online appe

a consumer as an entrant in the norwegian cement market this paper sheds light on the strategy of two entrants in the norwegian cement market where both started importing cement one entrant was an initial consumer of the incumbent s product and thus imported for own consumption the author demonstrates that this type of entrant will undertake a sunk investment to have access to a second supplier in cases where other types of entrants are deterred both types of entrants must accept a high import price if the incumbent can purchase the exclusive right to import from foreign suppliers the author finds that the two observed entry attempts are consistent with the model s predictions copyright 1993 by blackwell publishing ltd

competition and cooperation in the market for exclusionary rights salop and david scheffman 1983 show that firms profitably can gain market power by conduct that raises their competitors costs raising rivals costs is a more credible route to market power than is predatory pricing because it is not necessary to cause the rivals to exit no deep pocket is required and the additional profits are gained immediately that paper argues that vertical restraints and contracts with input suppliers can be fertile ground for raising competitors costs by contracting with one or more suppliers to exclude rivals either by dealing with them on discriminatory terms or refusing to deal with them altogether a firm sometimes can increase its rivals costs as a result it can sometimes gain the power to raise price in the market in which it sells output this type of contract often can be characterized as the purchase of an exclusionary right from the input suppliers that is in addition to the purchase of inputs the predator also purchases the right to exclude some of its rivals from access to the suppliers inputs exclusionary rights contracts can exist in a variety of forms at one extreme are agreements that involve only exclusionary rights no inputs are exchanged at all for example it was reported in alcoa that at one time alcoa purchased exclusionary covenants from power companies from which it did not purchase electricity the contracts involved only the utilities promises not to sell electricity to other aluminum companies such naked exclusionary rights contracts are unusual of course most exclusionary rights are bundled with the sale of inputs for example stroh beer has alleged that the two major brewers purchase not only advertising time on network sports programs but also the right to exclude remaining brewers from advertising on those same programs even though the networks have other advertising time available it might be argued that such exclusionary conduct would always fail for two reasons the excluded rivals would have available effective counterstrategies to prevent their own exclusion and input suppliers would have no incentives to reduce their sales by excluding some customers these criticisms imply that raising rivals costs by contracting with suppliers would not be credible it surely is not true that exclusionary strategies to restrict rivals input purchases will always succeed in raising their costs for example where rivals easily can substitute to other equally cost effective inputs or where entry into the production of inputs is so easy that the excluded rivals can efficiently produce the input themselves then cost raising strategies will fail moreover where competition in the output market would be sufficient to maintain low prices despite the exit or increased costs of the excluded competitors then no profit maximizing firm would spend any resources trying to exclude those rivals these conditions are discussed in detail in our earlier paper 1985 tdiscussants ronald h coase university of chicago gregory k down yale university david sappington bell communications research and university of pennsylvania

an empirical model of labor supply in a life cycle setting this paper formulates and estimates a structural intertemporal model of labor supply using theoretical characterizations derived from an economic model of lifetime behavior a two step empirical analysis yields estimates of intertemporal and uncompensated substitution effects which provide the information needed to predict the response of hours of work to life cycle wage growth and shifts in the lifetime wage path

disruptive change in the taxi business the case of uber in most cities the taxi industry is highly regulated and utilizes technology developed in the 1940s ride sharing services such as uber and lyft which use modern internet based mobile technology to connect passengers and drivers have begun to compete with traditional taxis this paper examines the efficiency of ride sharing services vis a vis taxis by comparing the capacity utilization rate of uberx drivers with that of traditional taxi drivers in five cities the capacity utilization rate is measured by the fraction of time a driver has a fare paying passenger in the car while he or she is working and by the share of total miles that drivers log in which a passenger is in their car the main conclusion is that in most cities with data available uberx drivers spend a significantly higher fraction of their time and drive a substantially higher share of miles with a passenger in their car than do taxi drivers four factors likely contribute to the higher capacity utilization rate of uberx drivers 1 uber s more efficient driver passenger matching technology 2 the larger scale of uber than taxi companies 3 inefficient taxi regulations and 4 uber s flexible labor supply model and surge pricing more closely match supply with demand throughout the day

option values to conservation and agricultural price policy application to terrace construction in kenya policy reforms to liberalize agricultural markets in developing countries are likely to influence both the level and the variability of prices while considerable attention has been given to the impact of changes in price level on soil and water conservation there has been relatively little analysis of the role of price variability in conservation decisions we present a model of investment under uncertainty to analyze the effect of both level and variability of prices on the decision to invest in conservation the model is applied to adoption of fanya juu terraces in eastern kenya

investment in site specific crop management under uncertainty implications for nitrogen pollution control and environmental policy this paper applies an option pricing model to analyze the impact of uncertainty about output prices and expectations of declining fixed costs on the optimal timing of investment in site specific crop management sscm it also analyzes the extent to which the level of spatial variability in soil conditions can mitigate the value of waiting to invest in sscm and influence the optimal timing of adoption and create a preference for custom hiring rather than owner purchase of equipment numerical simulations show that while the net present value npv rule predicts that immediate adoption is profitable under most of the soil conditions considered here recognition of the option value of investment indicates that it is preferable to delay investment in sscm for at least 3 years unless average soil quality is high and the variability in soil quality and fertility is high the use of the option value approach reveals that the value of waiting to invest in sscm raises the cost share subsidy rates required to induce immediate adoption above the levels indicated by the npv rule

an experimental examination of vertical control and cost predation abstract in recent years there has been renewed interest in and concern about firms use of vertical control as a way to exert market power such behavior could be used to gain a competitive advantage over rivals in input and or output markets this paper uses laboratory experimental methods to examine three questions i is anti competitive behavior by a dominant firm in input markets an observable behavior ii is cost predation an observable laboratory phenomenon and iii if such behaviors are observed what are the efficiency consequences results of this dominant firm experiment indicate that all three questions can be answered in the affirmative and the negative efficiency consequences can be profound

exclusionary vertical contracts and product market competition this article considers whether a monopolist is able to deter more efficient entrants through contracting with buyers in the antitrust literature the chicago school s stand is that such contracts cannot be anticompetitive hence vertical contracts should be accorded per se legal status in a four stage game with the following features 1 the incumbent enjoys a first mover advantage 2 the entrant must incur some sunk cost to enter the market and 3 entry is uncertain the author shows that vertical contracts can be anticompetitive if there exists product market competition thus the author advocates caution in treating all contracts as per se legal a three factor repeated measures experiment tested the effect of leadership style charismatic structuring and considerate on performance improvement on a manufacturing task over four trials findings from a repeated measures multivariate analysis of variance indicated that individual exposed to considerate leadership had superior initial performance but that this difference faded over time further analysis indicated that self efficacy fully mediated the relationship between leadership style and performance copyright 1999 by university of chicago press

profiting from countervailing power an effect of government control we demonstrate that a firm subject to government regulation might expect an increase in profit upon creation of an independent monopoly upstream such a monopoly serves to increase the expected cost of the regulated firm as a result even regulators who behave socially optimally will decrease the frequency with which they audit reports of high production cost the reduction in governmental investigation permits the firm to increase the rents it derives from its superior information about cost the possible implications of our model for a theory of political limit pricing are also briefly mentioned

a comparison of alternative crop response models three parsimonious models are hypothesized to represent com yield response to nitrogen and phosphorus each model imposes specific restrictions with regard to the elasticity of factor substitution and growth plateau nonnested hypothesis tests are used to evaluate the competing hypotheses the results support the restrictions imposed by the mitscherlich baule model for these data corn response is characterized by limited substitution between nitrogen and phosphorus and a growth plateau further the cost of using optimal input levels implied by the mitscherlich baule if it were not true is small relative to the other parsimonious forms and a translog approximation

selection on observed and unobserved variables assessing the effectiveness of catholic schools in this paper we measure the effect of catholic high school attendance on educational attainment and test scores because we do not have a good instrumental variable for catholic school attendance we develop new estimation methods based on the idea that the amount of selection on the observed explanatory variables in a model provides a guide to the amount of selection on the unobservables we also propose an informal way to assess selectivity bias based on measuring the ratio of selection on unobservables to selection on observables that would be required if one is to attribute the entire effect of catholic school attendance to selection bias we use our methods to estimate the effect of attending a catholic high school on a variety of outcomes our main conclusion is that catholic high schools substantially increase the probability of graduating from high school and more tentatively attending college we find little evidence of an effect on test scores

frictions in a competitive regulated market evidence from taxis this paper presents a dynamic equilibrium model of a taxi market the model is estimated using data from new york city yellow cabs two salient features by which most taxi markets deviate from the efficient market ideal are first matching frictions created by the need for both market sides to physically search for trading partners and second regulatory limitations to entry to assess the importance of these features we use the model to simulate the effect of changes in entry alternative matching technologies and different market density we use the geographical features of the matching process to back out unobserved demand through a matching simulation the matching function exhibits increasing returns to scale which is important to understand the impact of changes in this market and has welfare implications for instance although alternative dispatch platforms can be more efficient than street hailing platform competition is harmful because it reduces effective density

exclusive contracts and demand foreclosure a firm may induce some customers to sign exclusive contracts in order to deprive a rival of the minimum viable size exclude it from the market and enjoy increased market power this strategy may result in socially inefficient exclusion even if the excluded firm is present at the contracting stage and can make counteroffers in addition allowing for breach penalty clauses decreases firms incentives to exclude rivals because such clauses allow a firm to use customers as a conduit for the transfer of another firm s profits

a theory of entrepreneurship and institutional uncertainty abstract uncertainty and institutions are each vital concepts in entrepreneurship research however little work has been done to combine them into a consistent conceptual framework for analyzing the dynamic aspects of entrepreneurial action uncertainty and institutional change using insights from new institutional economics we develop a model that explains the institutional uncertainty resulting from conflicts between institutions on different levels of social activity we further explain how entrepreneurs can both cause and mitigate this uncertainty through market and institutional action finally we focus on a special case of institutional uncertainty regime uncertainty wherein entrepreneurs are left without reliable means to overcome uncertainty in political institutions

the labor supply of fixed wage workers estimates from a real effort experiment abstract fixed wage workers comprise the bulk of the labor force and yet little is known about how they respond to changes in their wage given recent interest in theories of reciprocity and intrinsic motivation and their implications for effort provision the neoclassical prediction seems less obvious today to better understand the motivation of these workers i estimate their labor supply using a real effort experiment two results stand out first no one theory seems to fit the pooled data on average people work considerably harder than the minimum but they do not respond to changes in the wage second pooling the data is deceptive because there seem to be distinct types with differing responses to the wage most workers can be classified as reciprocal or intrinsically motivated and indeed these types respond as theory would predict reciprocators return wage gifts with increased effort and extrinsic incentives crowd out motivation for intrinsic workers

economic feasibility of variable rate technology for nitrogen on corn the economic feasibility of three different fertilizer management strategies constant rate three rate and multiple rate technology in the application of nitrogen fertilizer to corn are compared under different probability distributions for field fertility a constant rate was more profitable than either variable rate technology system for homogeneous fields with low fertility the application area at which the relative profitability between systems changed was largely determined by the characteristics of the fertility distribution rather than by assumptions regarding costs variable rate technology improves groundwater quality in low fertility fields by reducing total fertilizer applied and in high fertility fields by increasing corn yield

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

are long term wage elasticities of labor supply more negative than short term ones standard models imply that the wage elasticity of labor supply is more negative the longer a wage change lasts i observe decreasing daily hours during short term wage increases but not during a long term one daily income goals adjusted in the long term

exclusionary manipulation of markets for pollution rights abstract strategic price manipulation can affect the distribution of transferable pollution rights across polluters and the efficiency of pollution control efforts prior research has concentrated on market manipulation by firms seeking only to minimize the sum of pollution rights costs and pollution abatement costs in this paper we explore the potential for the exclusionary manipulation of pollution permit markets intended to drive up the costs of one s rivals and we distinguish between the resource allocation effects of exclusionary manipulation and cost minimizing manipulation we find that exclusionary manipulation can sometimes worsen and sometimes ameliorate the abatement inefficiency which occurs under cost minimizing manipulation and that an overbuying rule can obviate or at least limit damages from this form of strategic behavior

technology adoption decisions under irreversibility and uncertainty an ex ante appproach empirical results demonstrate that uncertainty about costs and requirements for environmental compliance is an important determinant of dairy producers investment behavior ex ante forecasting of how uncertainty and irreversibility are likely to affect producers responsiveness to agricultural technologies has implications for the design of environmental policies simulation modeling methods are described the empirical analysis focuses on texas producers propensity to adopt free stall dairy housing free stall investments offer advantages for both productivity augmentation and pollution abatement yet uncertainty and irreversibility are obstacles to adoption implications of this ex ante paradigm for policy design and implementation are discussed

the feasibility and importance of adding measures of actual experience to cross sectional data collection we use michigan panel study of income dynamics data and data from a 2008 telephone survey of adults conducted by westat for the princeton data improvement initiative pdii to explore the importance and feasibility of adding retrospective questions about actual work experience to cross sectional data sets we demonstrate that having such actual experience data is important for analyzing women s postschool human capital accumulation residual wage inequality and the gender pay gap further our pdii survey results show that it is feasible to collect actual experience data in cross sectional telephone surveys like the march current population survey s annual supplement

drivers of disruption estimating the uber effect abstract a frequent belief is that the rise of so called gig work has led to the displacement of workers in a wide range of traditional jobs this paper examines the impacts of the flagship of the gig economy uber on workers employed in conventional taxi services our analysis exploits newly collected data on the staggered rollout of uber across metropolitan areas in the united states and a difference in differences design to document that incumbent taxi drivers experienced a relative earnings decline of about 10 percent subsequent to uber s entry into a new market while there are no significant effects on their labor supply additional evidence from a battery of placebo tests event study estimates and specifications using google trends data to capture differences in treatment intensity underlines these findings a triple differences design that compares changes among taxi drivers relative to bus tractor and truck drivers that were unaffected by the arrival of uber provides further supporting evidence that the diffusion of uber has reduced the earnings potential of incumbent drivers in conventional taxi services in the united states

emission permit banking pollution abatement and production inventory control of the firm abstract in this paper we present a dynamic model modified with emission permit banking and pollution abatement and investigate the effect of emission permit banking and pollution abatement on the production inventory strategy of the firm after introducing emission permit banking and pollution abatement the cost function consists of the inventory holding and production costs the cost of investment in abatement capital goods and the emission procurement selling cost furthermore the inventory holding costs are linear production costs are non decreasing and convex functions of the production level and the costs of investment in abatement capital goods are increasing and convex functions of the investment level we compare the optimal production inventory strategy before emission permit banking and pollution abatement and thereafter the mathematical investigation is based on the arrow karlin model

union wage practices and wage dispersion within establishments this study analyzes establishment level data primarily to examine the effect of unionism on the wage structure within establishments the major finding is that within establishment dispersion of wages is significantly narrower in unionized than in nonunionized establishments a pattern the author attributes in large part to unions wage practices such as single rate or automatic progression modes of wage payment as opposed to merit reviews and individual wage determination the data also show that dispersion in average wages is narrower among organized plants but by more modest amounts than the within establishment differential overall the evidence suggests a major role for explicit union wage policies in explaining the dispersion of wages within firms and in the economy as a whole

the role of entrepreneurship in us job creation and economic dynamism the united states has long been viewed as having among the world s most entrepreneurial dynamic and flexible economies it is often argued that this dynamism and flexibility has enabled the us economy to adapt to changing economic circumstances and recover from recessions in a robust manner while the evidence provides broad support for this view the outcomes of entrepreneurship are more heterogeneous than commonly appreciated and appear to be evolving in ways that could raise concern evidence along a number of dimensions and a variety of sources points to a us economy that is becoming less dynamic of particular interest are declining business startup rates and the resulting diminished role for dynamic young businesses in the economy we begin by describing how the concept of entrepreneurship is reflected in existing data on firm age and size the recent addition of firm age to official statistics represents a dramatic improvement in the information available to entrepreneurship researchers we then turn to a discussion of the role of startup firms in job creation business startups account for about 20 percent of us gross total job creation while high growth businesses which are disproportionately young

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

investment moral hazard and occupational licensing i analyse occupational licensing as an input regulation that requires minimum levels of human capital investment by professionals by raising professionals training levels licensing helps alleviate moral hazard problems associated with the provision of high quality services i also consider certification whereby consumers are provided information about professionals training levels i show that licensing and certification tend to benefit consumers who value quality highly at the expense of those who do not licensing may raise total surplus if sellers investments are not observable but is pareto worsening if training levels are observable certification may however lead to excessive investment as a signalling device and thus be pareto inferior to either licensing or to a policy of laissez faire

can real option values explain apparent storage at a loss since decisions to sell grain are irreversible waiting to sell grain can have a real option value this real option value may explain why producers appear to store too long a new seasonal mean reversion model is estimated that allows prices to be a random walk with drift within a season but mean reverting across crop years unless prices are extremely low selling before mean reversion begins is optimal thus the real option value of waiting does not explain why some producers seem to store at a loss in the latter part of crop years

behavioral economics and public policy a pragmatic perspective the debate about behavioral economics the incorporation of insights from psychology into economics is often framed as a question about the foundational assumptions of economic models this paper presents a more pragmatic perspective on behavioral economics that focuses on its value for improving empirical predictions and policy decisions i discuss three ways in which behavioral economics can contribute to public policy by oering new policy tools improving predictions about the eects

stochastic technology risk preferences and adoption of site specific technologies a model of farmer decision making is developed to determine the extent to which uncertainties about soil fertility and weather affect the value of site specific technologies ssts using jointly estimated risk and technology parameters uncertainty can lead risk averse farmers to apply more fertilizers and generate more pollution than in the certainty case ignoring uncertainty and risk aversion would overestimate the economic and environmental benefits of ssts and underestimate the subsidy required to induce adoption accounting for uncertainties and risk preferences might explain the low observed adoption rates of ssts improving the accuracy of ssts would increase the incentives for adoption

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

wage effects of unionization and occupational licensing coverage in the united states recent estimates in standard models of wage determination for both unionization and occupational licensing have shown wage effects that are similar across the two institutions these cross sectional estimates use specialized data sets with small sample sizes for the period 2006 to 2008 the authors analysis examines the impact of unions and licensing coverage on wage determination using new data collected on licensing statutes that are then linked to longitudinal data from the national longitudinal survey of youth nlsy79 from 1979 to 2010 they develop several approaches using both cross sectional and longitudinal analyses to measure the impact of these two labor market institutions on wage determination the estimates of the economic returns to union coverage are greater than those for licensing statutes

paying for procurement analysis of landman compensation surveys abstractutilizing a unique time series of cross sectional surveys we analyse the labour market for professional landman services to establish the factors affecting compensation during a recent per

reference dependent job search evidence from hungary we propose a model of job search with reference dependent preferences with loss aversion relative to recent income the reference point in this model newly unemployed individuals search hard since consumption is below their reference point over time though they get used to lower income and thus reduce their search effort in anticipation of a benefit cut their search effort rises again then declines once they get accustomed to the lower postcut benefit level the model fits the typical pattern of exit from unemployment even with no unobserved heterogeneity to distinguish between this and other models we use a unique reform in the unemployment insurance ui benefit path in 2005 hungary switched from a single step ui system to a two step system with overall generosity unchanged the system generated increased hazard rates in anticipation of and especially following benefit cuts in ways the standard model has a hard time explaining we estimate a model with optimal consumption endogenous search effort and unobserved heterogeneity the reference dependent model fits the hazard rates substantially better than plausible versions of the standard model including habit formation our estimates indicate a slow adjusting reference point and substantial impatience likely reflecting present bias jel codes d03 j64 j65

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

loss aversion under prospect theory a parameter free measurement agrowing body of qualitative evidence shows that loss aversion a phenomenon formalized in prospect theory can explain a variety of field and experimental data quantifications of loss aversion are however hindered by the absence of a general preference based method to elicit the utility for gains and losses simultaneously this paper proposes such a method and uses it to measure loss aversion in an experimental study without making any parametric assumptions thus it is the first to obtain a parameter free elicitation of prospect theory s utility function on the whole domain our method also provides an efficient way to elicit utility midpoints which are important in axiomatizations of utility several definitions of loss aversion have been put forward in the literature according to most definitions we find strong evidence of loss aversion at both the aggregate and the individual level the degree of loss aversion varies with the definition used which underlines the need for a commonly accepted definition of loss aversion