Effects of Taxi Market Deregulation: Evidence from a Natural Experiment

  • Authors

    Jääskeläinen, Jan; Leppälä Samuli; Väättänen, Anni

  • ISSN

    2954-1859

Abstract

We study the effects of deregulation of the Finnish taxi market using a differencein-difference framework. We estimate the causal effects of deregulation on consumers, taxi firms, and taxi drivers. Our key finding is that the offered fares have increased in all regions. However, the variation in the fares is significant and consumers choose lower fares when available. Large regions saw an increase in the number of taxi firms post-deregulation, which is reflected in lower average revenue, lower number of employees per firm, and a decrease in average profits. The number of taxi firms in small and medium-sized regions has not changed, but profits have declined despite the increase in fares. We develop a theoretical model to explain this contradictory result.