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Is Uber a substitute or complement for public transit?
How Uber affects public transit ridership is a relevant policy question facing cities worldwide. Theoretically, Uber’s effect on transit is ambiguous: while Uber is an alternative mode of travel, it can also increase the reach and flexibility of public transit’s fixed-route, fixed-schedule service. We estimate the effect of Uber on public transit ridership using a difference-in-differences design that exploits variation across U.S. metropolitan areas in both the intensity of Uber penetration and the timing of Uber entry. We find that Uber is a complement for the average transit agency, increasing ridership by five percent after two years. This average effect masks considerable heterogeneity, with Uber increasing ridership more in larger cities and for smaller transit agencies.
The complementary effect for small transit agencies suggests customers are using Uber to circumvent the fixed-route, fixed-schedule problem.
Transit users in large cities have greater variation in income, and the complementary effects could come from the group of riders who can afford Uber.
High-income riders could also explain why Uber has a large complementary effect on rail ridership and a negative effect on bus ridership: rail riders typically have higher incomes, while high-income bus riders might be willing to pay for a pricier Uber ride.
Uber seems to be decreasing ridership on larger systems, and our estimates suggest the effect on these systems counteracts the increase on smaller systems.
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