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Estimating the Price Elasticity of Demand for Subways: Evidence from Mexico

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  • Lucas W. Davis

Abstract

This paper uses fare changes in Mexico City, Guadalajara, and Monterrey to estimate the price elasticity of demand for urban rail transit. In two of the cases there is a significant fare increase (30%+), and in the third there is a 60-day fare holiday. Ridership responds sharply in the expected direction in all three cities, implying price elasticities which range across cities from -.23 to -.32. In addition, there is suggestive evidence that the temporary fare holiday led to a higher baseline level of ridership. These estimates are directly relevant for policymakers considering alternative pricing structures for urban rail. The paper discusses the relevant economic considerations and then shows how the estimated elasticities can be used to perform policy counterfactuals.

Suggested Citation

  • Lucas W. Davis, 2020. "Estimating the Price Elasticity of Demand for Subways: Evidence from Mexico," NBER Working Papers 28244, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28244
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    Cited by:

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    2. Agrawal, David R. & Zhao, Weihua, 2023. "Taxing Uber," Journal of Public Economics, Elsevier, vol. 221(C).
    3. Chen, Ruoyu & Zhou, Jiangping, 2022. "Fare adjustment’s impacts on travel patterns and farebox revenue: An empirical study based on longitudinal smartcard data," Transportation Research Part A: Policy and Practice, Elsevier, vol. 164(C), pages 111-133.
    4. Gómez Gélvez, Julian & Mojica, Carlos, 2022. "Subsidios al transporte público en América Latina desde una perspectiva de eficiencia: aplicación a Bogotá, Colombia," IDB Publications (Working Papers) 12260, Inter-American Development Bank.
    5. Yaqi Hu & Yingzi Chen, 2022. "Coupling of Urban Economic Development and Transportation System: An Urban Agglomeration Case," Sustainability, MDPI, vol. 14(7), pages 1-17, March.
    6. Yunyi Li & Minhua Shao & Lijun Sun & Xinmiao Wang & Shizhao Song, 2023. "Research on Demand Price Elasticity Based on Expressway ETC Data: A Case Study of Shanghai, China," Sustainability, MDPI, vol. 15(5), pages 1-11, March.
    7. Ignacio Escañuela Romana & Mercedes Torres-Jiménez & Mariano Carbonero-Ruz, 2023. "Elasticities of Passenger Transport Demand on US Intercity Routes: Impact on Public Policies for Sustainability," Sustainability, MDPI, vol. 15(18), pages 1-27, September.

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    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning

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