Disruptive Change in the Taxi Business: The Case of Uber

15 Pages Posted: 14 Mar 2016

See all articles by Judd Cramer

Judd Cramer

Princeton University - Department of Economics

Alan B. Krueger

Princeton University - Industrial Relations Section; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Date Written: March 2016

Abstract

In most cities, the taxi industry is highly regulated and utilizes technology developed in the 1940s. Ride sharing services such as Uber and Lyft, which use modern internet-based mobile technology to connect passengers and drivers, have begun to compete with traditional taxis. This paper examines the efficiency of ride sharing services vis-à-vis taxis by comparing the capacity utilization rate of UberX drivers with that of traditional taxi drivers in five cities. The capacity utilization rate is measured by the fraction of time a driver has a fare-paying passenger in the car while he or she is working, and by the share of total miles that drivers log in which a passenger is in their car. The main conclusion is that, in most cities with data available, UberX drivers spend a significantly higher fraction of their time, and drive a substantially higher share of miles, with a passenger in their car than do taxi drivers. Four factors likely contribute to the higher capacity utilization rate of UberX drivers: 1) Uber’s more efficient driver-passenger matching technology; 2)the larger scale of Uber than taxi companies; 3) inefficient taxi regulations; and 4) Uber’s flexible labor supply model and surge pricing more closely match supply with demand throughout the day.

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Suggested Citation

Cramer, Judd and Krueger, Alan B., Disruptive Change in the Taxi Business: The Case of Uber (March 2016). NBER Working Paper No. w22083. Available at SSRN: https://ssrn.com/abstract=2747203

Judd Cramer (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Alan B. Krueger

Princeton University - Industrial Relations Section ( email )

Princeton, NJ 08544-2098
United States
609-258-4046 (Phone)
609-258-2907 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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