Property Rights Restrictions and Self-Employed Workers: Evidence From For-Hire Owner–Operators in U.S. Trucking

Abstract

In 2019, self-employed individuals in the United States owned and operated more than 27 million nonemployer firms and generated more than $1.3 trillion in revenue. Our study examines how self-employed workers adjust their operations in response to an exogenous regulatory change that places limits on how they can utilize their productive assets. Extending modern property rights theory of the firm (PRTF), we studied how self-employed for-hire truck drivers modified their operations in response to the required installation of electronic logging devices (ELDs) in their vehicles. The introduction of ELDs bolstered enforcement of preexisting legal hours-of-service limits, thereby weakening the drivers’ ability to accept hauls above statutory hours-of-service limits and reducing the strength of their economic property rights. Our difference-in-differences analysis that relies on self-employed truck drivers exempt from the ELD regulation as a control group reveals that the restrictions imposed by the ELD mandate, while effective at curbing major hours-of-service violations, prompted a change in a host of market behaviors among affected drivers, including a shift toward working as subcontractors, decreased labor supply, and increased exit rates from the industry. These findings contribute to the literature on PRTF. First, our findings underscore the significance of economic property rights in shaping self-employed workers’ operating decisions as legal property rights were largely left unchanged under the ELD regulation. Second, our findings with respect to subcontracting highlight that property rights restrictions placed on asset attributes may prompt self-employed workers to unbundle economic property rights and allocate them to exchange partners better equipped to maximize the economic value reaped from these rights. Such transfer of economic property rights common to intermediate forms of organizational design such as subcontracting embodies a multidimensional view of economic property rights. By demonstrating a range of consequences of restricting self-employed workers’ economic property rights, our study carries important implications for theory, managers, and policymakers.