Taxi Deregulation Good for Consumers
January 30, 2004
In 1978, taxi license holders in Ireland successfully petitioned the government to restrict entry into their trade by limiting the number of licenses. They argued that because there were significantly more taxis than the demand justified, incomes were being depressed. Over the next 22 years, licenses became increasingly scarce, driving up the average price of a license to 90,000 Irish pounds in 2000.
However, that same year, the taxi business was deregulated -- and a new report in Economic Affairs suggests consumers are all the better for it. Its findings include:
- The number of cabs nearly tripled within two years.
- The price of a taxi license has since fallen to approximately 5,000 Irish pounds -- with overall market entry costs falling by 74 percent -- reducing the cost base for the industry, and in time, lowering fare rates.
- Wait times have decreased significantly -- the proportion of people waiting for more than five minutes for a taxi fell from 75 percent in 1997 to 52 percent in 2001.
The report also found that there was no drop in standards or in the quality of service.
Despite the successes of deregulation, concentrated producer interests -- license holders and labor unions -- have made some inroads in reversing or reducing its impact. For example, old license holders will be compensated for the losses they incurred as a result of the fall in the price of licenses. Moreover, a new taxi regulator and Taxi Advisory Council have been established to oversee industry standards, license fees and stakeholder interests.
Source: Sean D. Barrett, "Regulatory Capture, Property Rights and Taxi Deregulation: A Case Study," Economic Affairs, December 2003, Institute of Economic Affairs.
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