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Abstract
Numerous regulations govern entry, industry structure, service quality and prices for the Sydney taxi industry. The paper finds few efficiency or social reasons for these regulations and taxi performance is poor. On plausible assumptions, the net benefits from unrestricted entry into the Sydney taxi industry are in the order of $265 million per annum. The productivity and service benefits of reforming entry would be greater if accompanied by reform of the anti-competitive control of the taxi radio networks over all taxi operators.
Introduction2
The taxi industry is heavily regulated in most Australian cities, with regulations covering the number of taxis, industry structure, service quality and prices. These regulations have been retained despite numerous Australian and international reviews finding that the taxi industry is over-regulated in Australia and other countries respectively (see Productivity Commission 1999; National Competition Council 2000; UK Office of Fair Trading 2003; OECD 2007). Moreover, in cities in New Zealand, Ireland, the Netherlands, Sweden and the United Kingdom where supply restrictions have been removed or loosened, 'the results of these reforms have been highly positive, with reduced waiting times, increased consumer satisfaction and, in many cases, falling prices being observed' (OECD 2007: 8).
In this paper I describe the regulations on the taxi industry in Sydney and discuss the consequences, discuss public policy objectives and estimate the benefits of deregulation, discuss why the government is so reluctant to deregulate the industry and conclude with policy suggestions. While the focus is on Sydney, similar issues exist in most other Australian cities.
The Taxi Industry in Sydney
Figure 1 provides a sketch of the taxi industry in Sydney. There are four main participants: owners of taxi 'plates', operators of taxis, taxi radio networks and taxi drivers. 3 A plate is essentially a piece of paper conferring on the owner the right to operate a taxi. Operators of taxis must acquire a plate (as well as an operator's licence by undertaking a training course) in order to operate a taxi but they often lease the plate from a plate owner.
About 3600 entities own 5174 taxi plates in Sydney (IPART 2009). Some 75 per cent of the plates are perpetual taxi licences mostly issued free before 1990. The other 25 percent of plates...