Incentives on the Road: Multitask Principal-Agent Problem and Traffic Accidents in the Trucking Industry

IDE Research Bulletin

March 2017

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Background

The trucking services industry plays an essential role of connecting East Asian production net-works, i.e., producers of raw materials, intermediate inputs, final goods, and retailers within and across industrial clusters. The quality of services of the trucking industry affects significantly efficient flow of goods and embodied technologies of goods in agriculture, manufacturing and other service sectors. Rapid industrial development has been increasing cargo traffic within and
across East Asian countries. In tandem with the rapid industrial development and motorization,traffic accidents have been increasing in developing countries including ASEAN member states. Road traffic kills approximately 1.24 million people on the world’s roads (WHO 2013), which are as many people as malaria does. Although the situation of road safety in developing economies is getting worse, there is a huge disparity in road traffic death rate between developing and de-veloped countries, and among developing countries. For example, the rate for Thailand is almost double of the Indonesia, while the rate for Japan is much lower than these ASEAN member states (38.1 for Thailand vs. 17.7 for Indonesia vs. 3.8 for Japan). Estimated GDP loss due to road traffic death for developing economies is also higher than that for developed economies. This enormous social transportation cost indicates huge potential savings from keeping road safety for developing economies. Furthermore, the logistics cost was about 15.2% of the GDP in Thailand.