Working Paper: NBER ID: w23296
Authors: M. Keith Chen; Judith A. Chevalier; Peter E. Rossi; Emily Oehlsen
Abstract: Participation in non-traditional work arrangements has increased dramatically over the last decade, including in settings where new technologies lower the transaction costs of providing labor flexibly. One prominent example of flexible work is the ride-sharing company Uber, which allows drivers to provide (or not provide) rides anytime they are willing to accept prevailing wages for providing this service. An Uber-style arrangement offers workers flexibility in both setting a customized work schedule and also adjusting the schedule from week to week, day to day, and hour to hour. Using data on hourly earnings for Uber drivers, we document the ways in which drivers utilize this real-time flexibility and we estimate the driver surplus generated by this flexibility. We estimate how drivers’ reservation wages vary from hour to hour, which allows us to examine the surplus and supply implications of both flexible and traditional work arrangements. Our results indicate that, while the Uber relationship may have other drawbacks, Uber drivers benefit significantly from real-time flexibility, earning more than twice the surplus they would in less flexible arrangements. If required to supply labor inflexibly at prevailing wages, they would also reduce the hours they supply by more than two-thirds.
Keywords: Flexible Work; Uber Drivers; Labor Supply; Reservation Wages
JEL Codes: J22; L91
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| time variation in drivers' reservation wages (J29) | identification of taste for flexibility (L15) |
| drivers' labor supply decisions (J29) | identification of time-varying reservation wages (J29) |
| flexibility of the Uber platform (D26) | substantial increase in driver surplus (R48) |
| inflexible labor supply requirements (J20) | reduction in hours supplied by drivers (J22) |
| reservation wages are lower than expected earnings (J31) | willingness to work (J29) |
| variability of wages across different times (J31) | sensitivity of drivers to changes in reservation wage (J39) |