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Reference-Dependent Preferences and the Labor Supply of Chinese Drivers

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Document pages: 19 pages

Abstract: This paper takes a comprehensive study of taxi drivers’ labor supply behaviorusing a new dataset of taxi drivers from China. We find strong evidence thatthe working hours of drivers are negatively related to the hourly rates, andthis effect is both statistically and economically significant. We then conducta discrete-choice model, showing that the probability of stopping keepsincreasing as cumulative working hours increase, but the probability ofstopping first increases and then decreases as the cumulative fare increases.Lastly, we use the asymmetric model with the income target and working hourtarget as dummy variables, and the probability of stopping is significantlypositively related to income target but shows no significant relation withcumulative fare.

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