NCPA - National Center for Policy Analysis


July 29, 2005

Observers have documented the refusal of cab drivers to pick up minority passengers, implying that drivers racially discriminate. However, a new study suggests that cab drivers' preferences may have more to do with economics than race.

In a study involving 1,000 cab drivers in New Haven, Conn., Yale Law School professor Ian Ayres and coauthors found:

  • Overall, African-American and Hispanic passengers tipped 50 percent less than white passengers.
  • African-American passengers tipped black drivers about one-third less than they did white drivers.
  • Cab drivers can expect about 9 percent less revenue when picking up African-American passengers relative to white passengers.

However, the researchers also found disparities in how drivers of different races are tipped:

  • African-American cab drivers are tipped about one-third less than white drivers.
  • Passengers tend to "round up" tips for white drivers relative to black drivers.

The study authors note two important caveats:

  • The study participants self-reported their tips, so the possibility exists that some tips were systematically underreported for black passengers or overreported for white passengers.
  • African-American passengers may tip less due to drivers providing inferior service to minorities.

Mandated tipping, say the authors, may be a solution to tipping disparities among passengers and drivers, but there is reason for pause before implementing such a policy. Voluntary tipping can create incentives for drivers to provide better service. Furthermore, generous tippers subsidize rides for those who can't afford to tip, so mandatory tipping for all would increase the cost for poor passengers.

Source: Ian Ayres, Frederick E. Vars, and Nasser Zakariya, "To Insure Prejudice: Racial Disparities in Taxicab Tipping," Yale Law Journal, May 3, 2005.

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