Regulatory Overdrive

Traditional taxis are highly regulated in most American cities, with local regulators determining everything from how many taxis can be licensed to the types of services they can provide to the fares they can charge to where they can pick up customers. But does all this regulation make sense? To begin to answer this question, this study reviews the taxi regulations and market characteristics of 44 major U.S. cities. Key findings include:

• All 44 cities regulate taxis tightly, albeit idiosyncratically, suggesting cities are making taxi policy absent a common understanding of what regulations, if any, are necessary to protect consumers.
• Taxi markets tend to be highly concentrated, with the top three taxi firms controlling about 60 percent of the taxi vehicles operating in the average city.
• Taxi regulations likely contribute to lower levels of competition in taxi markets, with some regulations being associated with more concentrated ownership of taxi vehicles.
• Higher levels of market concentration are associated with lower availability of taxis.

These findings suggest taxi regulations may limit competition within the traditional taxi industry and may result in worse outcomes for consumers—less choice among taxi companies and fewer taxis on the streets. To increase competition and choice, cities should eliminate taxi regulations that serve only to thwart competition. They should also take lessons from their experiences with taxis to avoid making the same mistakes when it comes to regulating ridesharing and other innovative transportation services.