A Note on the Labour Supply Behaviour of NYC Cabdrivers: Does Experience Count?

Abstract

In a much talked about paper, Camerer, Babcock, Lowenstein and Thaler (1997), (hereafter CBLT) outline some potentially cautionary news about the intertemporal labour supply hypothesis. The basis of their paper is that cab drivers will face day to day variation in their wage rates due to a variety of factors (weather, subway breakdowns etc) which will affect demand, but that this variation is transitory. Their main conclusion is that there is some possibility that New York cabdrivers, who are the subject of their paper, might make their decisions one day at a time, using a daily income target. Chou (2002) in another paper looking at taxi divers in Singapore arrives at very similar conclusions. CBLT do take pains to point out that their result should be treated with some caution. However target income behaviour, of course, generates predictions which are counter to the intertemporal labour supply hypothesis, as on high wage days the cabdrivers will hit the income target earlier and work fewer hours. This short note looks at some of the CBLT data again and suggests that certain conclusions of the original article may be modified, particularly with respect to the effect of level of experience of the cabdriver, as the title suggests.