Ride-Sharing and the Geography of Consumption in Cities

Abstract

Despite the near ubiquity of ride-sharing services in cities worldwide, little evidence exists as to how these services affect economic behavior. Given the first-order role travel considerations play in shaping consumer choices, this paper studies the effect ride-sharing technology has on the geography of consumption in the city. Consistent with the notion that ride-sharing reduces spatial frictions, we find that it provides a significant stimulus to the restaurant and nightlife industry. Exploiting the sharp geographic and temporal variation in the availability of Uber, we find the arrival of Uber is associated with an increase in the number of restaurant and nightlife venues as well as a greater level of employment at those establishments. The increased economic activity suggests that ride-sharing not only leads to substitution from other modes of commuting but also promotes greater intra-city travel, generating consumption opportunities which may otherwise never happen. When evaluating the effect across neighborhoods, the results reveal wide disparities. New businesses entered in areas of the city with high pre-existing consumption amenities, adding to the extent of urban polarization. While it is commonly believed that ride-share platforms have contributed to more cost-effective urban transit, this study is the first to explore how the resulting change in transportation infrastructure generates meaningful gains and distributional implications for other sectors of the local economy.