Testing Alternative Models of Labor Supply. Evidence from Taxi-Drivers in Singapore.

In this paper, we use data from a survey of taxi drivers in Singapore to test two competing labor supply hypotheses: the standard intertemporal model and the income targeting model, where workers set an earnings target over some short time horizon. The former predicts positive wage elasticities of labor supply, while an extreme form of the latter implies an elasticity of -1. The estimated wage elasticities are persistently negative, even after correcting for measurement error using instrumental variables. However, these findings are consistent with those in Camerer et al. (1997)'s study of New York City cab drivers.