Standing or walking in the rain is an activity best avoided. In New York City (NYC), when faced with such inclement weather, the demand for personal transportation naturally increases. During such scenarios, taxi drivers spend less time searching for customers and could thus earn a higher wage. Nonetheless, it has been a common complaint that it is difficult to find a taxi in the rain.
As an alternative to taxis, Uber entered the NYC market in May 2011 with surge pricing and mobile driver-passenger matching technology. Surge pricing means passengers pay a higher rate for the Uber service during times of high demand, which gives incentives to Uber drivers to provide rides in inclement conditions. Uber could thus be a logical response to unmet demand during poor weather.
Is it easier to find a taxi or an Uber driver in the rain?
In a new IZA DP, Abel Brodeur (University of Ottawa & IZA) and Kerry Nield (Carleton University) examine whether the number of Uber and taxi rides increases in inclement weather conditions. Based on all Uber and taxi rides in NYC in 2014-2015, they find evidence that the number of Uber rides per hour is about 25 percent higher when it is raining, which suggests that surge pricing encourages an increase in supply. On the other hand, the number of taxi rides per hour rises by only 4 percent during this time period.
Is Uber depressing taxi demand?
The study also examines to what extent the increasing popularity of Uber in NYC is harming taxi drivers. The researchers found that the number of taxi rides per hour decreased by 8 percent after Uber entered the market. This result is consistent with a substitution from taxis to Uber cars.
Has Uber made it easier to get a ride in the rain?
The researchers then test whether it has become easier to find a ride in the rain since May 2011. They first compare the total (Uber plus taxi) number of rides in a post-Uber period to the number of taxi rides in a pre-Uber period and find that the total number of rides increased by approximately 9 percent in post-Uber years. Then, they test whether it has been relatively easier to get a ride in rainy than in non-rainy hours after May 2011. The results indicate that the total number of rides has increased proportionally more in rainy hours.
The results have important implications for the ongoing debate on whether Uber is depressing taxi demand and whether Uber increases consumers’ welfare. In particular, they highlight that Uber is substituting taxi drivers and that surge pricing seems effective in increasing labor supply.
Read the complete paper (IZA DP No. 9986):
Read also a previous paper by IZA fellow Henry S. Farber (IZA DP No. 8562):
- Why You Can’t Find a Taxi in the Rain and Other Labor Supply Lessons from Cab Drivers (published in the Quarterly Journal of Economics)