Kinship, trust and moral hazard in the motorcycle-taxi market in Togo and Benin

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Periodical article

Title:	Kinship, trust and moral hazard in the motorcycle-taxi market in Togo and Benin
Author:	Blimpo, Moussa P.
Year:	2015
Periodical:	Journal of African Economies (ISSN 0963-8024)
Volume:	24
Issue:	2
Pages:	173-192
Language:	English
Geographic terms:	Benin Togo
Subjects:	taxis drivers contracts property economic models
External link:	https://doi.org/10.1093/jae/eju032
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. The author analyses 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. Bibliogr., notes, ref., sum. [Journal abstract]