TY  - JOUR
AU  - Jackson,C. Kirabo
AU  - Schneider,Henry S.
TI  - Do Social Connections Reduce Moral Hazard? Evidence from the New York City Taxi Industry
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16279
PY  - 2010
Y2  - August 2010
UR  - http://www.nber.org/papers/w16279
L1  - http://www.nber.org/papers/w16279.pdf
N1  - Author contact info:
C. Kirabo Jackson
Northwestern University
School of Education and Social Policy
2040 Sheridan Road
Evanston, IL 60208
Tel: 847/467-1803
E-Mail: kirabo-jackson@northwestern.edu

Henry S. Schneider
Johnson Graduate School of Management
Cornell University
326 Sage Hall
Ithaca, NY 14853
E-Mail: henry.schneider@cornell.edu
AB  - 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.
ER  -