Paul L. Caron

Tuesday, April 27, 2021

Taxing Uber

David R. Agrawal (Kentucky) & Weihua Zhao (Louisville), Taxing Uber:

UberTransportation network companies (TNCs) such as Uber and Lyft create new challenges for local governments that provide public transit services, but they also create new opportunities to raise tax revenue. To shed light on the effect of taxing Uber, we construct a pseudo-monocentric city model to include multiple endogenously chosen transportation modes, including ride-hailing applications. In addition to trips to downtown, we also allow for idiosyncratic short trips for leisure purposes. We show that most tax and spending programs that cities have currently adopted only mildly increase transit usage. However, our model predicts significant increases in public transit ridership when TNCs are subsidized as a "last-mile" service.

Our model indicates that whether TNCs and public transit are substitutes or complements is a policy choice; in other words, the cross-price elasticities are endogenous to government policies.

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