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Moral Hazard in Leasing Contracts: Evidence from the New York City Taxi Industry

Henry S. Schneider
Cornell University - S.C. Johnson Graduate School of Management

November 2008

Johnson School Research Paper Series No. #03-09

Abstract:
In this study, I investigate the effects of moral hazard in leasing contracts by examining the driving outcomes of all long-term lessees and owner-operators of New York City taxis. I find that moral hazard explains a sizable fraction of lessees' accidents, driving violations, and vehicle inspection failures, and erodes a moderate fraction of industry income. To address the possibility of endogenous contract choice, I conduct an instrumental variables analysis on the cross-section of all drivers, and a panel-data analysis on a subset of drivers who switched from leasing to owning.

Working Paper Series

Date posted: June 16, 2008 ; Last revised: January 25, 2009

Suggested Citation

Schneider, Henry S., Moral Hazard in Leasing Contracts: Evidence from the New York City Taxi Industry (November 2008). Johnson School Research Paper Series No. #03-09. Available at SSRN: http://ssrn.com/abstract=1146648

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Contact Information

Henry S. Schneider (Contact Author)

Cornell University - S.C. Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States