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Estimating the Price Elasticity of Demand for Subways: Evidence from Mexico

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  • Lucas W. Davis

Abstract

This paper uses fare changes in Mexico City, Guadalajara, and Monterrey to estimate the price elasticity of demand for urban rail transit. In two of the cases there is a significant fare increase (30%+), and in the third there is a 60-day fare holiday. Ridership responds sharply in the expected direction in all three cities, implying price elasticities which range across cities from -.23 to -.32. In addition, there is suggestive evidence that the temporary fare holiday led to a higher baseline level of ridership. These estimates are directly relevant for policymakers considering alternative pricing structures for urban rail. The paper discusses the relevant economic considerations and then shows how the estimated elasticities can be used to perform policy counterfactuals.

Suggested Citation

  • Lucas W. Davis, 2020. "Estimating the Price Elasticity of Demand for Subways: Evidence from Mexico," NBER Working Papers 28244, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28244
    Note: EEE
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    Cited by:

    1. Brough, Rebecca & Freedman, Matthew & Phillips, David C., 2022. "Experimental evidence on the effects of means-tested public transportation subsidies on travel behavior," Regional Science and Urban Economics, Elsevier, vol. 96(C).
    2. Liang, Yuan & Wang, Donggen, 2025. "Is fare-free public transport effective in improving air quality? Evidence from Fuzhou, China," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 196(C).
    3. Agrawal, David R. & Zhao, Weihua, 2023. "Taxing Uber," Journal of Public Economics, Elsevier, vol. 221(C).
    4. Albalate, Daniel & Borsati, Mattia & Gragera, Albert, 2024. "Free rides to cleaner air? Examining the impact of massive public transport fare discounts on air quality," Economics of Transportation, Elsevier, vol. 40(C).
    5. Chen, Ruoyu & Zhou, Jiangping, 2022. "Fare adjustment’s impacts on travel patterns and farebox revenue: An empirical study based on longitudinal smartcard data," Transportation Research Part A: Policy and Practice, Elsevier, vol. 164(C), pages 111-133.
    6. Gómez Gélvez, Julian & Mojica, Carlos, 2022. "Subsidios al transporte público en América Latina desde una perspectiva de eficiencia: aplicación a Bogotá, Colombia," IDB Publications (Working Papers) 12260, Inter-American Development Bank.
    7. Yaqi Hu & Yingzi Chen, 2022. "Coupling of Urban Economic Development and Transportation System: An Urban Agglomeration Case," Sustainability, MDPI, vol. 14(7), pages 1-17, March.
    8. Yunyi Li & Minhua Shao & Lijun Sun & Xinmiao Wang & Shizhao Song, 2023. "Research on Demand Price Elasticity Based on Expressway ETC Data: A Case Study of Shanghai, China," Sustainability, MDPI, vol. 15(5), pages 1-11, March.
    9. Ignacio Escañuela Romana & Mercedes Torres-Jiménez & Mariano Carbonero-Ruz, 2023. "Elasticities of Passenger Transport Demand on US Intercity Routes: Impact on Public Policies for Sustainability," Sustainability, MDPI, vol. 15(18), pages 1-27, September.
    10. José Eduardo Castro Pérez & Daniel Flores, 2025. "Behavioral Responses to Environmental Emergency Alerts and Temporary Driving Restrictions: Evidence from Cyclists in Mexico City," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 88(6), pages 1719-1771, June.
    11. Liu, Antung A. & Wang, Yucheng & Zhang, Lei, 2025. "The effect of subway policies on gasoline consumption: Subway expansion versus fare changes," Journal of Urban Economics, Elsevier, vol. 149(C).
    12. Luo, Shulong & Wang, Yucheng, 2025. "The impacts of rate surge on electric vehicle charging behaviors: Evidence from California," Journal of Economic Behavior & Organization, Elsevier, vol. 236(C).

    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning

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