Why Aren't All Truck Drivers Owner-Operators? Asset Ownership and the Employment Relation in Interstate for-Hire Trucking

Abstract

Institutional economists have frequently cited trucks as prototypical user-owned assets, due to the perceived generic nature of such vehicles and the difficulty of monitoring their treatment by drivers. These scholars have consequently predicted a high prevalence of owner-operator drivers who contract with motor carriers. In fact, employment relations in the interstate trucking industry bear little resemblance to these predictions. Why does the reality of the interstate trucking industry differ so substantially from the predictions of institutional economists? We find that transaction costs are indeed important in the trucking industry, but those that influence the employment mode for drivers are somewhat different than those that have received attention in prior work. Notably, for trucking whose characteristics involve high levels of coordination, a type of temporal specificity is created. In addition, when carriers invest in reputation in the product market, such investments may lead to the integration in the factor market. We hypothesize that carriers favor the use of company drivers over owner-operators when these two characteristics are present.