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.