The economic effects of government regulation: Evidence from the New York taxicab market

This paper empirically investigates the economic effects of government regulation in a regulated taxicab market. We use a cointegration model with structural breaks to test the hypothesis that government regulation increases the price of the regulated good and/or causes the monopoly price. We examine the New York taxicab market and argue that regulation brings about artificial rents by increasing medallion prices, and an increase in medallion prices gives rises to upward pressure on taxi fares. The evidence presented shows that regulation of the New York taxicab market increases medallion prices, and this increase in medallion prices pressures on taxi fares.

► Regulation increases medallion prices.
► Increase in medallion prices gives rise to upward pressure on taxi fares.
► 1% decrease in the number of taxis causes a 0.45% increase on real medallion prices.
► 1% increase in real medallion prices causes a 0.12% increase in taxi fares.