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Uber versus Taxi: A Driver's Eye View

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  • Joshua D. Angrist
  • Sydnee Caldwell
  • Jonathan V. Hall

Abstract

Rideshare drivers pay a proportion of their fares to a ride-hailing platform operator, a commission-based compensation model used by many service providers. To Uber drivers, this commission is known as the Uber fee. By contrast, traditional taxi drivers in most US cities make a fixed payment independent of their earnings, usually a weekly or daily medallion lease, keeping every fare dollar net of lease costs and other expenses. We assess these compensation models using an experiment that offered random samples of Boston Uber drivers opportunities to lease a virtual taxi medallion that eliminates the Uber fee. Some drivers were offered a negative fee. Drivers' labor supply response to our offers reveals a large intertemporal substitution elasticity, on the order of 1.2, and higher for those who accept lease contracts. At the same time, our virtual lease program was undersubscribed: many drivers who would have benefited from buying an inexpensive lease chose to sit out. We use these results to compute the average compensation required to make drivers indifferent between rideshare and taxi-style compensation contracts. The results suggest that rideshare drivers gain considerably from the opportunity to drive without leasing.

Suggested Citation

  • Joshua D. Angrist & Sydnee Caldwell & Jonathan V. Hall, 2021. "Uber versus Taxi: A Driver's Eye View," American Economic Journal: Applied Economics, American Economic Association, vol. 13(3), pages 272-308, July.
    • Handle: RePEc:aea:aejapp:v:13:y:2021:i:3:p:272-308
    DOI: 10.1257/app.20190655
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    References listed on IDEAS

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    Cited by:

    1. Ali Elminejad & Tomas Havranek & Roman Horvath & Zuzana Irsova, 2023. "Intertemporal Substitution in Labor Supply: A Meta-Analysis," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 1095-1113, December.
    2. Hildenbrand, Hannah-Maria & von Rueden, Christina & Viete, Steffen, 2021. "Measuring the online platform economy in Germany," Working Papers 07/2021, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    3. Ke, Jintao & Li, Xinwei & Yang, Hai & Yin, Yafeng, 2021. "Pareto-efficient solutions and regulations of congested ride-sourcing markets with heterogeneous demand and supply," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 154(C).
    4. David Staines, 2023. "Stochastic Equilibrium the Lucas Critique and Keynesian Economics," Papers 2312.16214, arXiv.org.
    5. Li, Xiaonan & Li, Xiangyong & Wang, Hai & Shi, Junxin & Aneja, Y.P., 2022. "Supply regulation under the exclusion policy in a ride-sourcing market," Transportation Research Part B: Methodological, Elsevier, vol. 166(C), pages 69-94.
    6. Zhao, Zhiyuan & Yao, Wei & Wu, Sheng & Yang, Xiping & Wu, Qunyong & Fang, Zhixiang, 2023. "Identifying the collaborative scheduling areas between ride-hailing and traditional taxi services based on vehicle trajectory data," Journal of Transport Geography, Elsevier, vol. 107(C).
    7. Karadja, Mounir & Sundberg, Anton, 2023. "The labor market impact of a taxi driver’s license," Working Paper Series 2023:6, IFAU - Institute for Evaluation of Labour Market and Education Policy.

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    More about this item

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L84 - Industrial Organization - - Industry Studies: Services - - - Personal, Professional, and Business Services
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation

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