Tipping in Crises: Evidence from Chicago Taxi Drivers during COVID-19

Abstract

In early 2020, the novel coronavirus (COVID-19) spread to America and upended normal life for over a year. Using trip-level data on 17 million taxi rides taken in Chicago from 2018-2021, I explore how tipping patterns changed during the COVID-19 pandemic. I find that the average non-zero tip left by passengers increased by almost 2 percentage points, from roughly 26\% to 28\% of the taxi fare. Meanwhile, the likelihood that a passenger leaves a tip at all declined by roughly 5 percentage points, down from a pre-pandemic average of 95\%. I interpret these opposing effects on aggregate tipping generosity as evidence of the disparate economic effects of the pandemic and use a crude proxy of passenger's income to provide evidence for a K-shaped trends in tipping generosity. I offer a secondary hypothesis, that elevated tipping rates reflect an effort to compensate essential workers for the increased risk of COVID-19 infection, and test this theory of hazard pay by exploiting variation in trip lengths and daily hospitalizations at the time of trip. Given the numerous reasons one might expect tipping rates to decrease during the pandemic, I consider the aggregate increase in tip generosity during the pandemic as evidence that crises and broad negative shocks increase preferences for altruism and reciprocity in tipping.