Restrictions on entry to the taxi industry constitute an unjustified restriction on competition. Regulatory capture frequently means that these restrictions lead to large transfers from consumers to producers, economic distortions and associated deadweight losses. Taxis compete with a wide range of other transport options, including mini cabs, public transport and private vehicles. Substantial evidence suggests that restrictive approaches to taxi licensing taken in many countries, together with resulting upward price pressures, is progressively leading consumers to substitute away from the taxi industry. Absent a strong theoretical justification for restricting taxi numbers, this substitution is economically distorting and will lead to important welfare losses.
Taxi Services – Competition and Regulation