The Effect of Free-Fare in the Public Transport on Mode Choice: Evidence from São Caetano do Sul, Brazil

This paper estimates the effect of municipal fare-free public transport on the mode choice of workers and students in São Caetano do Sul, a dense municipality in the São Paulo Metropolitan Region. The policy took effect on 1 November 2023, part-way through the fieldwork of the 2023 Origin-Destination Household Survey, creating a natural setting to compare travel behaviour with and without free fares. Mode choice in the absence of the policy is recovered through a Multinomial Logit discrete choice model estimated exclusively on trips unaffected by the policy, and the fitted model is used to impute the counterfactual choices of the treated group. The public transport share of mandatory trips is estimated to rise by roughly 22% (from 23.1% to 28.3%), drawing primarily from car and motorcycle trips, with a smaller increase in walking. The groups that switch most strongly are non-residents of the city, non-white travellers, individuals below median income, and those under 40. Public transport exhibits the largest own-price and own-time elasticities among all modes. The annual welfare gain measured through consumer surplus is estimated at R$49.7 million, exceeding the R$35 million annual fiscal cost, for a benefit-cost ratio of about 1.42; the gain is distributed progressively, favouring lower-income travellers. Results are robust to placebo tests in time and space and to an alternative GTFS-based routing specification.