The Effect of Gas Prices and Gas Taxes on Public Transportation Ridership

Abstract

The cross-price elasticity of public transit ridership with respect to fuel prices is an important variable for policy makers to understand, especially as some areas consider taxes aimed at reducing the high carbon emissions associated with traditional vehicles. In this paper, I use panel data from 10 major American cities between 2006-2018 and estimate this elasticity to be 0.025, though I find significant variation between different modes of transportation and cities. I also investigate whether the entrance of Uber into these cities between 2010 and 2014 affected this elasticity, but I found the evidence for this to be inconclusive. Finally, previous research into this topic has not considered differences in the effect between gas tax changes and ordinary gas price changes, but there is theoretical and empirical evidence to suggest that the difference might be relevant. To address this, I consider evidence from all 50 states’ gas tax rates and annual transit usage over time as well as a difference-in-differences regression around a 2008 Minnesota fuel tax increase. The evidence from these analyses is mixed, with the latter analysis indicating a significant impact in the effect of fuel taxes on transit ridership but not the former.