Examining the Existence of Reference-Dependent Preferences among Agricultural Workers from Mexico

Abstract

Agricultural labor shortages in the United States have become severe in recent years, elevating the importance of agricultural labor supply responses to wage changes. Using data from the Mexican Migration Project, this paper explores the labor supply responses of Mexican migrant agricultural laborers on the intensive margin. I implement a two-stage least squares approach to examine the prominence of reference-dependent and neoclassical preferences and estimate the labor supply elasticity of Mexican farmworkers in the United States. I find evidence to suggest the dominance of reference-dependent preferences over neoclassical preferences and a negative labor supply elasticity among Mexican migrant agricultural laborers. The implications of these findings for policy are discussed.