Restructuring Effects of Deregulation: The Case of the New Zealand Taxi Industry

Abstract

In most countries the taxi industry is highly regulated and in cases where deregulation has been attempted, positive outcomes have not always been evident. The taxi industry was one of the very last to be deregulated by the New Zealand government as part of its sweeping restructuring of the country's industry in the 1980s. The author looks at the impact of that 1989 Act. The 1989 legislation, which removed the quantitative controls (deregulation), has been followed by a tripling of the number of companies in the metropolitan centres and a massive increase in the number of taxi cabs. A much wider range of taxi services now exploit different market segments and offer a wider geographic coverage. These changes have been accompanied by a decline in fares in real, if not nominal, terms. As expected, the influx of new players has necessitated the imposition of additional quality controls. Customers have benefited from greater numbers of cabs, shorter waiting times, and a greater range of services. Many more driving jobs have been opened up, although this is widely believed to have been accompanied by reduced incomes and longer hours until the market expanded. The larger firms which existed prior to deregulation have attempted to consolidate their market share in the face of increased competition from newer taxi organisations. There has also been increased competition between taxi and public transport operations as a variety of taxi companies tender for selected routes.