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Taxing Uber

Weihua Zhao, PhD David P. Agrawal
Journal of Public Economics. May 1, 2023

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Ride-hailing applications 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 or subsidizing ride-hailing services, we extend a pseudo-monocentric city model to include multiple endogenously chosen transportation modes, including ride-hailing applications and endogenous car ownership. We show that most tax and spending programs that cities have currently adopted mildly increase public transit usage. However, the model predicts more significant increases in public transit ridership when ride-hailing applications are subsidized as a “last-mile” provider. Our model indicates whether ride-hailing services and public transit are substitutes or complements is a policy choice.