Your Uber has Arrived: Ridesharing and the Redistribution of Economic Activity

I study how improvements in accessibility affect the shape of cities. Building on the existing literature on economic geography, which reveals how public infrastructure projects influence the distribution of economic activity in cities, I study the impact of a new private sector innovation: ridesharing. While research in this field often examines commuting patterns, I focus on travel for consumption, for two reasons: ridesharing services are usually used to consume rather than commute, and there is a growing appreciation that cities are centers of consumption (not just of production). 

To determine how improvements in accessibility impact economic outcomes in the amenity and housing markets, I use variation in accessibility from a natural experiment: UberX’s staggered entry in 34 U.S. cities. I find that amenities (such as restaurants) enter previously inaccessible locations once ridesharing opens up those locations. I find, too, that as these locations become more accessible, housing costs increase (with house prices increasing three times as fast as rents).

My dissertation research also shows how city residents benefit on net from ridesharing’s entry and the changes it induces. I embed my findings on the amenity and housing markets in a spatial equilibrium model and find that, after ridesharing’s entry, travel costs fall by half. I then construct a welfare measure which shows that the average resident benefits on net from ridesharing, with homeowners benefitting more than renters (because they realize home equity gains).

In summary, ridesharing, the newest private sector innovation in transportation technology has begun to reshape our cities. Restaurants have dispersed, house prices and rents have increased in inaccessible areas, and residents value these changes positively.

Caitlin Gorback is a 2020 Doctoral Recipient in Business Economics and Public Policy, The Wharton School.

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