Working Paper: NBER ID: w23891
Authors: Joshua D. Angrist; Sydnee Caldwell; Jonathan V. Hall
Abstract: Ride-hailing drivers pay a proportion of their fares to the ride-hailing platform operator, a commission-based compensation model used by many internet-mediated service providers. To Uber drivers, this commission is known as the Uber fee. By contrast, traditional taxi drivers in most US cities make a fixed payment independent of their earnings, usually a weekly or daily medallion lease, but keep every fare dollar net of expenses. We assess these compensation models from a driver’s point of view using an experiment that offered random samples of Boston Uber drivers opportunities to lease a virtual taxi medallion that eliminates the Uber fee. Some drivers were offered a negative fee. Drivers’ labor supply response to our offers reveals a large intertemporal substitution elasticity, on the order of 1.2. At the same time, our virtual lease program was under-subscribed: many drivers who would have benefitted from buying an inexpensive lease chose to opt out. We use these results to compute the average compensation required to make drivers indifferent between ride-hailing and a traditional taxi compensation contract. The results suggest that ride-hailing drivers gain considerably from the opportunity to drive without leasing.
Keywords: ridehailing; Uber; taxi; labor supply; compensation models
JEL Codes: J18; J22; J41; J58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Compensation changes (M52) | Labor supply of Uber drivers (J29) |
| Reduction of Uber fee (D26) | Labor supply response to virtual taxi medallion offer (J29) |
| Lease aversion (R21) | Decision-making regarding leasing contracts (K12) |
| Fee reductions (R38) | Hours driven (C41) |
| Fee reductions (R38) | Driver earnings (J31) |
| Average compensation required (J33) | Indifference between ridehailing and traditional taxi contracts (L92) |