Davis, Lucas “Estimating the Price Elasticity of Demand for Subways:
Evidence from Mexico” (Revised September 2020) | WP-307R | Blog
The sensitivity of demand for public transportation to fares has important implications for climate change, air pollution, and traffic congestion. However, there is surprisingly little recent evidence on this elasticity and virtually no evidence from low- or middle-income countries. 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 and specifications from -.19 to -.37. The paper then shows how these elasticities can be used to perform policy counterfactuals.