Disruptive Change in the Taxi Business: The Case of Uber. The American Economic Review

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[edit] Disruptive Change in the Taxi Business: The Case of Uber. The American Economic Review

Cramer, J., & Krueger, A. B. (2016). Disruptive Change in the Taxi Business: The Case of Uber. The American Economic Review, 106(5), 177–182.

DOI: 10.1257/aer.p20161002

Article Link: https://doi.org/10.1257/aer.p20161002

• Context

This study uses a combination of aggregated and micro-level data to examine and compare the capacity utilization rates of Uber and taxi drivers in various cities. The study determines the capacity utilization rate by analyzing the work hours of drivers and the amount of time they spend with fare-paying customers. Because UberX drivers are so dominant in the Uber ecosystem, special attention is given to them in this study. This analysis is based on data from five cities in Uber's administrative database, as well as data from Seattle and Los Angeles. The study takes into consideration a period prior to Uber's notable influence on the transportation business, which is noteworthy. It also adjusts for temporal differences between cab and Uber data. With possible explanations ranging from regulatory inefficiencies in the taxi industry to Uber's scale and technological advantages, the findings highlight notable differences in utilization rates between UberX and taxi drivers, raising concerns about the productivity of for-hire drivers.

• Overview

The purpose of the study is to compile information on the capacity utilization rates of Uber and taxi drivers in various cities. The information is obtained from aggregated data from Seattle and Los Angeles as well as micro-level daily data on the work hours and time of taxi drivers. Individual-level data on drivers' work hours and the number of hours they had a fare-paying passenger in their car can be used to calculate the capacity utilization rate. The same days of the week and proximity to the Boston Marathon are reflected in the data for Uber drivers. Because they make up the largest and fastest-growing group of Uber drivers, the study focuses on UberX drivers. Based on Uber's administrative database for drivers in five cities, the information is presented. Because the cab data comes from a year earlier than the Uber data and covers a time before Uber made major inroads into the industry, the study also takes timing into account.

With the exception of New York, all five cities' UberX drivers had substantially greater capacity utilization rates than taxi drivers, according to the report. While taxi drivers in Boston had passengers in their cars anywhere from 32% of the time to nearly half of the time in New York City, UberX drivers spend around half of their working hours with passengers in their cars. In addition, UberX drivers have a greater mileage-based capacity utilization rate (Fm) than taxi drivers. In terms of the percentage of miles driven with a passenger in the car, UberX drivers in Seattle outperform taxis by 41%. UberX drivers in San Francisco had a greater utilization rate than taxi drivers at all hours, with the narrowest margin between 4 and 8 pm. The variations in the mean capacity utilization rates are not caused by a small number of drivers.

For a variety of reasons, UberX drivers may attain better capacity utilization rates than taxi drivers. These include ineffective taxi licensing laws, Uber's flexible labor supply model, its bigger scale, network efficiencies from scale, and its more effective driver-passenger matching technology. UberX drivers who put in at least seven hours a day had nearly comparable occupancy rates in New York, Seattle, and Los Angeles. This implies that the entry and exit of UberX drivers during the day balances the market, such that the utilization rate remains constant for all drivers, regardless of how long they work. In New York City, UberX drivers' usage rate is 3.5 percent greater than that of taxi drivers', indicating that the little variation in capacity usage rate may be explained by variations in driver-passenger matching technology. The results have an impact on for-hire drivers' productivity because UberX drivers may charge 28% less per hour than taxi drivers while still making the same money.

• Strengths and Weaknesses

This article has both strengths and weaknesses that should be considered. The article's first strength is its extensive data collection, which uses individual level data on drivers' work hours and passenger presence in addition to aggregated and micro-level data. This thorough technique makes accurate evaluation possible. An additional advantage is the transparent way that their conclusions are presented; the study employs specific percentages and comparable measures to make the results clearly understandable. One of the disadvantages that comes to mind is the restricted geographic scope. Even though the study looks at a number of cities, it doesn't offer a worldwide viewpoint on the problem. Another weakness is the possible bias in the data. The reason there is a possible bias is due to the fact that the article only focuses on UberX, meaning that different options in uber could have different rates such as UberGreen, UberXL, and Comfort.

• Assessment

This research carefully evaluates the capacity usage rates of Uber and taxi drivers in different cities by employing a combination of aggregated and personal data. It finds a pattern in which UberX drivers use the service at substantially higher rates than taxi drivers, with the exception of New York. The study identifies a number of possible causes for this inequality, such as operational benefits enjoyed by Uber and differences in regulations. It effectively examines the market balance and driver behavior, exposing the factors shaping the transportation environment. The productivity of for-hire drivers may be impacted by these findings, which emphasize in particular how UberX drivers retain higher rates even when they charge less. The study offers insightful information about how the field of urban mobility is changing.

Kh19an 00:38, 5 December 2023 (EST)