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 1, 2008
Johnson School Research Paper Series No. 03-09
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.
Number of Pages in PDF File: 33
Date posted: June 16, 2008 ; Last revised: February 20, 2010
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