ECON 310 Lecture 5: winter 2019
30 Jan 2019
School
Department
Course
Professor
Document Summary
Class five: suppose a worker is in the following situation, she can freely choose how many hours she works every day, there are frequent temporary changes in her hourly wage. In a controversial paper, camerer et al studied the labor supply of new york cab drivers: the typical cab driver rents their cab for a 12-hour period for a fixed fee. Wage elasticity of hours lies between -0. 503 to -0. 269: possible explanation: spurious correlation due to measurement error. If overstate hours, then calculated wage is lower than true wage. Will find a negative correlation even if they are not related: the authors use other driver"s wage and still find a negative correlation, the author"s favorite story: reference-dependent preferences, and specifically daily income targeting. Let"s answer the three questions under (b): what"s being evaluated in a reference-dependent way? (final outcome versus the reference- point) Loss aversion falling short of the target is more painful than going above is pleasant.
