The Effects of Economic Regulation: Evidence from the Istanbul and New York Taxicab Markets
Abstract: This paper empirically investigates the effects of economic regulation in the regulated markets. We develop an innovative cointegration model with structural breaks to test the hypothesis that government regulation increases the price of the regulated good and/or causes the monopoly price. We examine the Istanbul and New York taxicab markets and argue that regulation brings about artificial rents by increasing medallion prices, and an increase in medallion prices gives rises to upward pressure on taxi fares. The evidence presented shows that regulation of the both Istanbul and New York taxicab markets increases medallion prices, and this increase in medallion prices pressures on taxi fares.
