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Make Versus Buy in Trucking: Asset Ownership, Job Design and Information

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  • George P. Baker
  • Thomas N. Hubbard
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    Abstract

    Explaining patterns of asset ownership in the economy is a central goal of both organizational economics and industrial organization. We develop a model of asset ownership in trucking, which we test by examining how the adoption of different classes of on-board computers (OBCs) between 1987 and 1997 influenced whether shippers use their own trucks for hauls or contract with for-hire carriers. We find that OBCs' incentive-improving features pushed hauls toward private carriage, but their resource-allocation-improving features pushed them toward for-hire carriage. We conclude that ownership patterns in trucking reflect the importance of both incomplete contracts (Grossman and Hart (1986)) and of job design and measurement issues (Holmstrom and Milgrom (1994)).

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8727.

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    Date of creation: Jan 2002
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    Publication status: published as Baker, George P. and Thomas N. Hubbard. "Make Versus Buy In Trucking: Asset Ownership, Job Design, And Information," American Economic Review, 2003, v93(3,Jun), 551-572.
    Handle: RePEc:nbr:nberwo:8727

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    1. Grossman, Sanford J. & Hart, Oliver D., 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Scholarly Articles 3450060, Harvard University Department of Economics.
    2. Holmstrom, Bengt, 1999. "The Firm as a Subeconomy," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 74-102, April.
    3. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    4. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
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    Cited by:
    1. Daron Acemoglu & Philippe Aghion & Rachel Griffith & Fabrizio Zilibotti, 2007. "Vertical Integration and Technology: Theory and Evidence," IEW - Working Papers 342, Institute for Empirical Research in Economics - University of Zurich.
    2. Garicano, Luis & Hubbard, Thomas, 2003. "Specialization, Firms and Markets: The division of Labour Between and Within Law Firms," CEPR Discussion Papers 3699, C.E.P.R. Discussion Papers.
    3. Laura Abramovsky & Rachel Griffith, 2009. "ICT, corporate restructuring and productivity," IFS Working Papers W09/10, Institute for Fiscal Studies.
    4. John S. Earle & Ugo Pagano & Maria Lesi, 2002. "Information Technology, Organizational Form, and Transition to the Market," Upjohn Working Papers and Journal Articles 02-82, W.E. Upjohn Institute for Employment Research.
    5. Laura Abramovsky & Rachel Griffith, 2005. "Outsourcing and offshoring of business services: how important is ICT?," IFS Working Papers W05/22, Institute for Fiscal Studies.
    6. Matthew Dey & Susan Houseman & Anne Polivka, 2010. "What Do We Know About Contracting Out in the United States? Evidence from Household and Establishment Surveys," NBER Chapters, in: Labor in the New Economy, pages 267-304 National Bureau of Economic Research, Inc.

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