Moral Hazard in New York City’s Taxi Industry

WORKING PAPER SUMMARY
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The paper by Jackson and Schneider (2010) entitled, “Do Social Connections Reduce Moral Hazard? Evidence From The New York City Taxi Industry” discusses the implications of moral hazard in New York City’s taxi industry. Because of the nature of the taxi industry where operators own the vehicles and taxi drivers do not, moral hazard comes into play because of the limited, yet unconventional liability of the drivers versus the operators with regards to risks and physical, financial, and moral hazards. Since moral hazards are laws not commonly entered in contracts due to good faith between the parties, it is a significant problem considered by the authors. The paper analyzed how social connections mitigate the risk and impact of moral hazards generally be reducing occurrences where the risks would ...