Taxi Service Improvements


TDM Encyclopedia

Victoria Transport Policy Institute


Updated 23 April 2018

This chapter describes the role of taxi transport in a diverse transportation system, and ways of improving taxi service quality.




Taxi refers to for-hire automobile travel supplied by private companies. Taxi service is an important Transportation Option that meets a variety of needs, including Basic Mobility in emergencies, general transportation for non-drivers, and mobility for Tourists and visitors.


Taxi service can be an important backup option for other alternative forms of transport, such as allowing pedestrians to carry large loads back from a store, providing an emergency ride home when a cyclist has a medical or mechanical problem, or a Guaranteed Ride Home for a rideshare or transit commuter. Informal taxi service often develops in rural communities where certain motorists will drive their neighbors for a fee. In this role, Taxi Improvements can be an important support for TDM efforts to reduce personal automobile ownership and use, and encourage use of alternative modes.


Taxi service can be improved by:

·         Increasing the number of taxis in an area.

·         Increasing the quality of taxi vehicles (comfort, carrying capacity, reliability, safety), improving support services (such as radio dispatch), driver skill and courtesy.

·         Universal Design of taxi vehicles, including accommodating people in wheelchairs and with large packages.

·         Reducing fares through regulation, competition, increased efficiency, incentives or subsidies.

·         Allowing shared taxi trips (more than one passenger) and Paratransit services.

·         Providing taxi stands, curb access and direct telephone lines.



Taxi service is often regulated, with restrictions on market entry and pricing, although many communities are implementing Regulatory Reforms to encourage more competitive markets. Some experts recommend eliminating most regulations and allowing unlimited entry into the taxi market (Moore and Rose, 1998; Boroski and Mildner, 1998), but others argue that regulation should be structured to maximize service quality (Nelson/Nygaard, 2001).


A number of factors can affect the quality of taxi service and its ability to serve various types of trips. Below are some performance indicators that can be used to evaluate taxi service:

·         Availability. Number of taxis per capita, or per non-driver in an area.

·         Availability of taxis that accommodate people with special needs, such as wheelchair users.

·         Ease of ordering taxi services.

·         Reliability. Average dispatch time, and maximum delays.

·         Price for an average trip relative to users’ income. Availability of subsidies and discounts for people with special needs (such as disabilities) and other frequent users.

·         Vehicle comfort and cleanliness.

·         Driver and dispatcher courtesy.

·         Safety.

·         Number of user complaints.



How It Is Implemented

Taxi Improvements are usually implemented in cooperation between local governments, which regulate taxi service, and private companies, which provide taxi service. It sometimes involves transit agencies and other organizations that contract for transportation services. Taxi improvements may result from changes in taxi regulations, additional funding for subsidized taxi services, and improvements by taxi companies. Regulatory Reforms may be needed to eliminate unnecessary regulations and costs to taxi service.



Travel Impacts

Taxi Improvements can support use of alternative modes, including walking, cycling, ridesharing and transit use, by giving those modes’ users a better fallback option in emergencies. It can allow people to reduce their car ownership. Analysis by King, Peters and Daus (2011) indicates that public transport travelers often use taxis for a portion of their trips, for example, to commute home after transit service ends. In these ways, Taxi Improvements can contribute to relatively large reductions in vehicle travel. Experience with Guaranteed Ride Home programs indicates that improving the availability of fallback options can significantly increase use of alternative modes.


Table 1          Travel Impact Summary




Reduces total traffic.


Supports use of travel alternatives, and shared taxi service can replace multiple car trips.

Reduces peak period traffic.



Shifts peak to off-peak periods.



Shifts automobile travel to alternative modes.


Supports use off travel alternatives.

Improves access, reduces the need for travel.



Increased ridesharing.


Shared taxis are a form of ridesharing, and provides a fallback option to rideshare users.

Increased public transit.


Provides a fallback option to transit users

Increased cycling.


Can be an important emergency option for cyclists who have problems during a ride.

Increased walking.



Increased Telework.



Reduced freight traffic.



Rating from 3 (very beneficial) to –3 (very harmful). A 0 indicates no impact or mixed impacts.



Benefits and Costs

Taxi Improvements have relatively modest direct travel reduction impacts, and may even increase vehicle travel in some situations, but support the use of other alternative modes, including walking, cycling, ridesharing and public transit use, and so may make a modest contribution toward congestion reductions and other TDM objectives. It improves Transportation Choice and Resilience. Benefits and costs depend on what type of taxi service improvements are implemented. They may include changes (increases or decreases) in taxi service quality, availability, fares, wages or profits. Boroski and Mildner (1998, Exhibit 2) provide information on average taxi fares in typical North American cities.


Table 2          Benefit Summary




Congestion Reduction


Modest direct travel impacts, but supports other alternative modes.

Road & Parking Savings



Consumer Savings



Transport Choice



Road Safety



Environmental Protection



Efficient Land Use



Community Livability



Rating from 3 (very beneficial) to –3 (very harmful). A 0 indicates no impact or mixed impacts.



Equity Impacts

Taxi service is an important transportation option for many people who are transportation disadvantaged, and often provides Basic Mobility. Taxi Improvements can help achieve equity objectives.


Table 3          Equity Summary




Treats everybody equally.


Gives non-drivers better access and mobility options.

Individuals bear the costs they impose.



Progressive with respect to income.


Improves mobility services for lower-income people.

Benefits transportation disadvantaged.


Improves mobility services for non-drivers.

Improves basic mobility.


Taxi service often provides basic mobility.

Rating from 3 (very beneficial) to –3 (very harmful). A 0 indicates no impact or mixed impacts.




Taxi service improvements can be implemented in nearly any geographic area. They are implemented primarily by local and regional government agencies, and businesses.


Table 4          Application Summary





Large urban region.


Federal government.


High-density, urban.


State/provincial government.


Medium-density, urban/suburban.


Regional government.




Municipal/local government.


Low-density, rural.


Business Associations/TMA.


Commercial center.


Individual business.


Residential neighborhood.




Resort/recreation area.


Neighborhood association.


College/university communities.




Ratings range from 0 (not appropriate) to 3 (very appropriate).




Improves Transport Choice



Relationships With Other TDM Strategies

Taxi Improvements can support Guaranteed Ride Home, Commute Trip Reduction, Tourist Transport Management and Campus Transport Management. They can be part of Shuttle and Transit Service Improvements. Regulatory Reforms can support Taxi Improvements.




Stakeholders include regulatory agencies (often local or regional governments), taxi companies, organizations that contract for taxi services, and users.



Barriers To Implementation

Barriers can include institutional resistance to change from local governments and existing taxi companies, and lack of organization by users.



Best Practices

·         Consider taxi service as an important component of the transportation system.

·         Minimize unnecessary taxi service regulations and costs.

·         Allow shared taxis.

·         Encourage competition.

·         Encourage taxi companies to choose vehicles that accommodate people with disabilities, bicycles and large packages (Universal Design).

·         Involve users in establishing taxi regulations and policies.

·         Subsidize taxi service as a way to provide mobility in lower-density areas and off-peak times.

·         Provide public support, including taxi stands and curb access.



Wit and Humor

A taxi is picking up a passenger on a downtown street when a second man rushes up and says breathlessly, “I need to catch a flight at the airport in half an hour. I’ll give you $50 if you’ll let this cab take me there first.” The first passenger agrees to this, and away they go.

A few minutes later the second passenger says, “It’s very important that I make this flight. Please drive as fast as you can.”

The driver does his best, but traffic is heavy and they are not making much progress. After a few minutes the anxious passenger says, “I must make this flight! I’ll give you a $100 tip if you can get me to the airport in 20 minutes.”

The driver takes short cuts, but progress is still slow.

After another ten minutes the taxi is still just at the edge of town and the passenger yells, “It’s essential that I make this flight! I’ll give you a $500 tip if you can get me to the airport in ten minutes.” This really gets the taxi driver’s attention. He begins to speed down the road and race through intersections.

Five minutes later the passenger is bursting with anxiety, and yells, “It’s imperative that I make this flight! I’ll give you a $1,000 tip if you get me to the airport in less than five minutes!”

The taxi driver floors the accelerator and zooms down the roadway, swerving wildly through traffic, crossing back and forth over the center line, just missing oncoming vehicles. In front of the airport, as the taxi makes a wild swerve the urgent passenger hands the driver a thick wad of bills, jumps out of the moving vehicle and disappears into the terminal. Without stopping the taxi continues back to the highway.

The first passenger, pale from fear, looks at the taxi driver and the pile of money and says, “Goodness sakes, that was amazing driving. You really earned that tip. What do you plan to do with all that money?”

The driver replies, “Well, first I should have the darn brakes fixed on this taxi.”



Examples and Case Studies


City of Rimouski's Taxibus (

The City of Rimouski, Quebec (population 32,000) has found that taxies can provide a viable and cost-effective alternative to traditional bus transit systems. After studying various transit service scenarios using buses, Rimouski chose to launch its TAXIBUS service. TAXIBUS, established in 1993, is a demand-responsive service which relies solely on local taxicabs. Quebec's Ministry of Transport developed a software to help manage the service.

TAXIBUS operates Monday to Friday, serving 300 stops by predetermined schedules. Passengers, who pay $2.40 per ride or $70.55 per month, must reserve one hour ahead of time by phone (schedules are cancelled when no reservations are made). The taxi drivers are paid according to the readings of the taxi meter, from the time the first passenger is picked up, to the time the last passenger is dropped off. A recent cost comparison with other transit services in Quebec cities of similar size showed that costs associated with TAXIBUS are an average of CAN$12 less per capita.

After four years of operation, TAXIBUS has become increasingly popular, growing by 37% over four years (current figures are 60,000 trips per year). Cost increases were kept down by a 6% increase in productivity (by grouping more passengers together on a single ride ? which also has ecological benefits). The number of passengers per ride rose from 1.6 during the first few months of operation to 2.8 by 1996. Service costs per ride have dropped from $5.18 to $4.35 per passenger (21% of which are administrative expenses).

Taxies can provide a variety of transportation services. These include: carrying people to a transfer location such as a bus terminal or railway station (called “treintaxi” in the Netherlands); replacing buses between rush hours; extending the service schedule of regular public transit; providing service to scarcely populated areas; acting as a complementary service for transportation of people with disabilities; and transporting groups previously organized by a third party.


Recommendations for Regulating Taxi & Ride-Hail

In the report,  Unfinished Business: A Blueprint for Uber, Lyft and Taxi Regulation, Transportation consultant Bruce Schaller recommends a set of policy reforms to ensure that ride-hail companies best serve the common good. He argues that there are significant differences between “dispatch” (passengers order a taxi) and “flag” (passengers are served by taxis on a street or transportation terminal) services. Dispatch markets, in which hailing was historically done by phone, now commonly via app by Transportation Network Companies (TNC), are less prone to individual abuse, but flag services are functional monopolies that require more regulation.

He makes recommendations concerning six issues: 

  1. A level playing field between taxis and TNC. Schaller recommends a two-tiered system differentiating between “dispatch” and “flag” operation. For “dispatch” service, governments should roll back some taxi regulation to enable fair competition between taxi and TNC. Customers choose which company to ride with. At the same time, for “flag” service, government should “retain more extensive regulations, including numerical controls and fare regulation… to prevent oversupply, fare gouging, and chaotic street conditions.”
  2. Fingerprinting drivers. Schaller recommends managing driver-related risks using both forward-looking and backward-looking methods. The report recommends fingerprint-based criminal record checks as the “established best practice for identifying drivers with criminal records.” Requiring this would put taxis and TNC on equal footing. Fingerprint background checks, standard for taxis, are being studied by the CPUC, as well as Chicago and Massachusetts. Driver performance should be addressed on an ongoing basis via “safety management systems that monitor, train, and provide feedback to drivers.”
  3. Wheelchair-accessible service. Schaller points to the failure of past fleet-wide disability-access regulations, and recommends that wheelchair-accessible service should be funded through a fee on all rides. He recommends that robust wheelchair-accessible service be operated by specific operators that choose to do so. That’s already been done successfully, an example being Arlington’s Red Top Cab company’s accessible taxi program. Drivers for Red Top who opt to serve wheelchair users receive specialized training and financial incentives.
  4.  Drivers as independent contractors or employees. There is a rosy, imagined picture of ride-hail drivers as independent part-timers making a few bucks on the side, driving only when they choose to work. According to Schaller, though, the bulk of the service is provided by drivers who work full time or close to it: “41 percent of Uber rides in the company’s twenty largest U.S. markets are provided by drivers who work at least 35 hours a week. In addition, 38 percent of the service is provided by drivers working roughly half-time (16 to 34 hours a week).” Schaller recommends “providing civil rights protections, and ensuring that worker benefits are either provided by law or left to meaningful channels of negotiation between drivers and companies.”
  5. State vs. local regulation. Here Schaller again draws a distinction between “dispatch” and “flag” regulation. For “dispatch” service, TNC and taxis could be regulated at a higher level, such as county or state. For “flag” service, the concerns are more local, such as serving a specific airport site; hence the regulation should continue to be a more local level, such as city or county.
  6. Schaller recommended that transportation agencies get consistent data from all taxi and TNC companies. Agencies could use travel time/cost data to better model travel demand, and ultimately to price the use of road space.



Taxi Deregulation Trends (Kang 1998)

Taxi service has been deregulated in many countries, including the U.S, U.K., New Zealand, Japan, South Korea, Australia, The Netherlands and Sweden. As an example, The Swedish Transport Policy Act of 1989 provided the framework for the deregulation of the industry in 1990, suggesting that the best service for the lowest economic cost would be supplied by a deregulated taxicab industry subject to free market forces. Deregulation of the Swedish taxi market was carried out in five steps:

1.       Barriers controlling entry were removed, so that an operator can have as many taxicabs as desired. This relieved the county councils of their former task of estimating the demand for taxi services in each operating area.

2.       Fare controls were removed, so that taxi companies became to be able to set their own fares. However, they were required to inform customers about the fare prior to trips, and taxicabs must be equipped with receipt writing meters.

3.       The requirement for all taxicabs to belong to a radio booking centre was abandoned. At the same time, in order to stimulate competition between centres, publicly owned centres were established in the market as an alternative to the existing privately owned centres.

4.       Geographically restricted operating areas were eliminated.

5.       Strictly regulated operating hours were removed.


Many U.S. cities have partially or wholly eliminated local taxi regulations during the late 1970’s and early 1980’s. These included San Diego, Seattle, Phoenix, Portland, Sacramento, Kansas City and Milwaukee, as well as some smaller cities of significant size such as Tucson in Arizona, Oakland and Fresno in California, Raleigh in North Carolina, etc. Further discussions on taxi deregulation are still on going in America, and it has occurred or tried in several cities in 1990's, including Indianapolis (1994), Houston (1995), Denver, Hartford and Boston.



Taxi Regulation Review (Aarbaug 2014)

A detailed review of taxi market regulatory reforms for international cities reached the following conclusions:


There are two general recommendations for taxi regulations. First, taxi markets are local and this has to be kept in mind when taxi operators are regulated. Second, real taxi markets are a complex mix of different segments with different properties. This means that there is no single right answer to the question of regulation. Each segment has a different theoretical optimal solution. This points in to a multi-tier system (regulating the different segments separately). However there are both economics of scale and scope at work, favouring a single tier system (having the same regulation for all segments).


In terms of which regulatory approach to follow, the link between objectives and regulations are strongest with the qualitative approach, however this approach is costly. Quantitative regulations are much less costly, but is not as easy to link with policy objectives (unless congestion is the main concern). Economic regulations are most suitable to address the information asymmetry in the street market segments. In other words, in all but the largest of cities, where costs of regulation are low compared with the size of the industry, and the economics of scope from using the same vehicle in different market segments are insignificant, regulators can choose between several "second best" solutions. As a consequence taxis should not be seen out of context from the other mobility and environmental objectives of a city




References and Resources for More Information


Jørgen Aarhaug (2014), Taxis as Urban Transport, Transportøkonomisk institutt (Institute of Transport Economics) (; at


John Boroski and Gerard Mildner (1998), An Economic Analysis of Taxicab Regulation in Portland, Oregon, Cascade Policy Institute (


Owen P. Curtis (2015), “Common Sense, Fair Play, and Transportation Network Companies,” ITE Journal (, Vol. 85, No. 12, pp. 44-47; at


Eric J. Gonzales, et al. (2014),Modeling Taxi Demand with GPS Data from Taxis and Transit, and MNTRC Report 12-16, Mineta National Transit Research Consortium, (; at


International Association of Transportation Regulators ( provides an international, professional association for transportation regulators to cooperate and consider matters of mutual interest and concern, and to exchange ideas.


Choong-Ho Kang (1998), Taxi Deregulation: International Comparison, PhD Dissertation, Institute for Transport Studies, The University of Leeds (


David King, Jonathan Peters and Matthew Daus (2011), Taxicabs for Improved Urban Mobility: Are We Missing an Opportunity?, Transportation Research Board Annual Meeting (; at Also see, “What Taxis Add to Public Transit,” by Eric Jaffe, The Atlantic Cities (


Daniel Klein, Adrian Moore and Binyam Reja (1997), Curb Rights: A Foundation for Free Enterprise Urban Transit, Brookings Institution Press (


Joe Linton (2016), New Bruce Schaller Report: Recommendations for Regulating Taxi & Ride-Hail, StreetBlog LA (; at


MOSES - Mobility Services for Urban Sustainability ( is developing mobility services to reduce dependence on the private car throughout Europe. It will employ new technologies to integrate urban transportation services (e.g. carsharing, public transport, taxi, cycling, delivery services etc.) for maximum efficiency. This project is sponsored by the European Union.


Nelson/Nygaard (2001), Making Taxi Service Work in San Francisco, San Francisco Planning and Research Association (


Robert W. Poole, Jr., and Michael Griffin (1994), Shuttle Vans: The Overlooked Transit Alternative, #176, Reason Public Policy Institute (


Schaller Consulting Taxi Regulation Reports ( ).


Bruce Schaller (2015), Between Public and Private Mobility: Examining the Rise of Technology-Enabled Transportation Services, Special Report 319 Taxi, Sedan, and Limousine Industries and Regulations, Transportation Research Board (; at


Taxi-L Website ( provides links to documents and links related to taxi transport.


Taxicab, Limousine & Paratransit Association ( is a non-profit trade association of and for the private passenger transportation industry.


Taxi and Livery Topics Webpage ( by Schaller Consulting, provides a variety of information on taxi service planning and management, mainly related to New York City.


Taxi, Urban Mobility Solution of the Future ( is a conference held September 2007 to explore the role that taxi transport plays in urban transport systems.

This Encyclopedia is produced by the Victoria Transport Policy Institute to help improve understanding of Transportation Demand Management. It is an ongoing project. Please send us your comments and suggestions for improvement.




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