Do ride-hailing congestion fees in NYC work?

Abstract

What is the impact of congestion policies targeting ride-hailing systems? This work empirically evaluates NYC’s congestion surcharge policy, particularly in light of the city’s forthcoming implementation of congestion pricing. Using a Difference-in-Differences (DiD) framework, our analysis reveals a statistically significant reduction of approximately 11% in overall ride-hailing travel volume following the implementation of the policy. In particular, Lyft experienced a 17% reduction in travel demand while Uber and yellow-cabs experienced reductions of about 9% and 8% respectively. We further elucidate two key mechanisms — travel distance and subway station availability — to explain this reduction. The surcharge policy has a more pronounced impact on shorter trips (with the most significant decline observed in trips less than one mile), and on ride-hailing trips originating from areas with at least one substitute (such as subway or Citi Bike). Furthermore,the policy’s effect seems more pronounced in lower-income areas of the city and seems to reduce street-hailing industry revenues by 8%. However, despite these reductions, the policy does not result in a corresponding decrease in traffic congestion. Thus, it seems that the policy results in a net welfare loss for the city, at least in the shorter term. Our findings provide insights for understanding the dynamics of congestion policies focused on the ride-hailing industry, especially as New York City prepares to introduce congestion pricing.