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

  • Henry Schneider

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. To address the possibility of endogenous contract choice, I conduct an instrumental variables analysis of the cross section of all drivers and a panel-data analysis of a subset of drivers who switched from leasing to owning.

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File URL: http://dx.doi.org/10.1086/652423
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File URL: http://dx.doi.org/10.1086/652423
Download Restriction: Access to the online full text or PDF requires a subscription.

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Article provided by University of Chicago Press in its journal The Journal of Law and Economics.

Volume (Year): 53 (2010)
Issue (Month): 4 ()
Pages: 783 - 805

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Handle: RePEc:ucp:jlawec:doi:10.1086/652423
Contact details of provider: Web page: http://www.journals.uchicago.edu/JLE/

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  1. Wayne Dunham, 2003. "Moral Hazard and the Market for Used Automobiles," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 23(1), pages 65-83, August.
  2. John Mullahy, 1997. "Instrumental-Variable Estimation Of Count Data Models: Applications To Models Of Cigarette Smoking Behavior," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 586-593, November.
  3. Gavazza, Alessandro, 2010. "Leasing and Secondary Markets: Theory and Evidence from Commercial Aircraft," MPRA Paper 28821, University Library of Munich, Germany.
  4. Laffont, Jean-Jacques & Matoussi, Mohamed Salah., 1988. "Moral Hazard, Financial Constraints and Sharecropping in El Oulja," Working Papers 667, California Institute of Technology, Division of the Humanities and Social Sciences.
  5. Igal Hendel & Alessandro Lizzeri, 2002. "The Role of Leasing under Adverse Selection," Journal of Political Economy, University of Chicago Press, vol. 110(1), pages 113-143, February.
  6. Franks, Julian R & Hodges, Stewart D, 1987. " Lease Valuation When Taxable Earnings Are a Scarce Resource," Journal of Finance, American Finance Association, vol. 42(4), pages 987-1005, September.
  7. George P. Baker & Thomas N. Hubbard, 2003. "Make Versus Buy in Trucking: Asset Ownership, Job Design, and Information," American Economic Review, American Economic Association, vol. 93(3), pages 551-572, June.
  8. Jean Pinquet & Pierre-André Chiappori & Jaap Abbring & James J Heckman, 2003. "Adverse selection and moral hazard in insurance: can dynamic data help to distinguish?," Post-Print hal-00397115, HAL.
  9. Pierre-Andre Chiappori & Bernard Salanie, 2000. "Testing for Asymmetric Information in Insurance Markets," Journal of Political Economy, University of Chicago Press, vol. 108(1), pages 56-78, February.
  10. Waldman, Michael, 1997. "Eliminating the Market for Secondhand Goods: An Alternative Explanation for Leasing," Journal of Law and Economics, University of Chicago Press, vol. 40(1), pages 61-92, April.
  11. Daniel A. Ackerberg & Maristella Botticini, 2002. "Endogenous Matching and the Empirical Determinants of Contract Form," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 564-591, June.
  12. John D. Benjamin & Kenneth M. Lusht & James D. Shilling, 1998. "What Do Rental Contracts Reveal About Adverse Selection and Moral Hazard in Rental Housing Markets?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 26(2), pages 309-329.
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