NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Scott Masten

University of Michigan Business School
University of Michigan
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NBER Working Papers and Publications

March 2002Contracting in the Absence of Specific Investments and Moral Hazard: Understanding Carrier-Driver Relations in U.S. Trucking
with Francine Lafontaine: w8859
This paper considers functions of contracting other than the protection of relationship-specific investments and the provision of marginal incentives, and applies the theory to explain variation in the form of compensation of over-the-road truck drivers in the U.S. Specifically, we argue that contracts in this industry serve to economize on the costs of price determination for heterogeneous transactions. We show that the actual terms of those contracts vary systematically with the nature of hauls in a way that is consistent with the theory. By contrast, we find that vehicle ownership, which defines a driver's status as an owner operator or company driver, depends on driver, but not trailer or haul, characteristics.
 
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