66 Pages Posted: 20 Oct 2020 Last revised: 27 Apr 2021
Date Written: August 31, 2020
Transportation network companies (TNCs) create new challenges for governments providing transit services, but also create new opportunities to raise tax revenue. To shed light on the effect of taxing TNCs, we extend a pseudo-monocentric city model to include multiple endogenously chosen transportation modes, including ride-hailing applications. 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" provider. Our model indicates that whether TNCs and public transit are substitutes or complements is a policy choice.
Keywords: ride-hailing, taxation, public transit, traffic congestion, optimal tolls
JEL Classification: C60, H25, H71, L88, L98, R41, R51
Suggested Citation: Suggested Citation