Do Social Connections Reduce Moral Hazard? Evidence from the New York City Taxi Industry / C. Kirabo Jackson, Henry S. Schneider.

Format:

Book

Author/Creator:

Jackson, C. Kirabo.

Contributor:

National Bureau of Economic Research.

Schneider, Henry S.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16279.

NBER working paper series no. w16279

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

This study investigates the role of social networks in aligning the incentives of economic agents in settings with incomplete contracts. We study the New York City taxi industry where taxis are often leased and lessee-drivers have worse driving outcomes than owner-drivers as a result of a moral hazard associated with incomplete leasing contracts. Using instrumental variables and fixed-effects analyses, we find that: (1) drivers leasing from members of their country-of-birth community exhibit significantly reduced effects of moral hazard; (2) network effects appear to operate primarily via social sanctions; and (3) network benefits can help to explain the organization of the industry in terms of which drivers and owners form business relationships.

Notes:

Print version record

August 2010.