Do Social Connections Reduce Moral Hazard? Evidence from the New York City Taxi IndustryC. Kirabo Jackson, Henry S. Schneider
NBER Working Paper No. 16279 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.
Machine-readable bibliographic record - MARC, RIS, BibTeX Document Object Identifier (DOI): 10.3386/w16279 Published: Jackson, C. Kirabo, and Henry S. Schneider. 2011. “Do Social Connections Reduce Moral Hazard? Evidence from New York City Taxi Industry.” American Economic Journal: Applied Economics. 3 (July): 244267 citation courtesy of Users who downloaded this paper also downloaded* these:
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