Inefficiencies in The Transport Sector: Evidence from Liberia

In Sub-Saharan Africa, intra-national transport costs are the highest in the world (World Bank 2009). The goal of this project is to understand how inefficiencies in the transport companies can explain these high transport costs. A major source of inefficiency in transport companies in Liberia seems to be a moral hazard where the agent is the truck driver and the principal is the manager. The company - and often the manager - owns the truck and takes the responsibility for delivering the services to the client. Meanwhile, the driver makes a set of decisions that will affect the output and that the firm cannot control. If the truck will have incentives to minimize his effort and to not take the action that will maximize the output. The actions the driver takes include the speed of the truck, the route taken and the number of breaks. These will all impact not only the quality of the service provided but also the costs incurred by the company, like fuel costs or repairs on the truck. In many developed countries, the firms monitor the drivers with GPS trackers. However, very few companies in Liberia use this technology. I am conducting a randomized control trial on transport companies in Liberia, among which I randomly select trucks to receive a GPS tracker. The system allows the manager to monitor the movements of the truck on his phone or computer. With this new technology the manager knows in real time where the driver is and is able to project more accurately when he will arrive at its destination.