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Editor's choice Kinship, Trust and Moral Hazard in the Motorcycle-Taxi Market in Togo and Benin

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  • Moussa P. Blimpo

Abstract

In the motorcycle-taxi market in most Sub-Saharan African countries, the relation between vehicle owner and driver is characterised by a principal-agent problem with the following features: the owner cannot observe the final output of the driver and therefore cannot condition a wage on it, and higher effort from the driver depreciates the motorcycle. These two features imply that it is in the owner's best interest that the driver exerts as little effort as possible while still leasing the motorcycle from him. The problem with low-effort implementation is that the motorcycle will not generate enough revenue. I analyse the contractual arrangements between owners and the drivers in this market using survey data from four cities in Togo and Benin. Evidence suggests that the quest for trust through kinship between owner and driver may explain the prevalence of a contract that induces drivers to exert excessive effort, leading to adverse outcomes like traffic accidents.

Suggested Citation

  • Moussa P. Blimpo, 2015. "Editor's choice Kinship, Trust and Moral Hazard in the Motorcycle-Taxi Market in Togo and Benin," Journal of African Economies, Centre for the Study of African Economies, vol. 24(2), pages 173-192.
    • Handle: RePEc:oup:jafrec:v:24:y:2015:i:2:p:173-192.
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    File URL: http://hdl.handle.net/10.1093/jae/eju032
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