Taxi industry inquiry

Assessing profitability in competition policy analysis, Economic Discussion Paper 6, July 2003 (a report prepared for the Office of Fair Trading by OXERA) for a discussion on the benefits of using this technique.

238 Productivity Commission (2001), Structural Adjustment — Key Policy Issues, Commission Research Paper, AusInfo, Canberra, p. xi-xii

239 See chapter 6 of the Draft Report for a discussion about previous reform efforts.

240 A comprehensive discussion of adjustment policy issues is contained in three Productivity Commission publications published between 1999 and 2001: Structural Adjustment — Exploring the Policy Issues, Workshop Proceedings (1999); Regulation of the Taxi industry, Commission Research Paper (1999); Structural Adjustment — Key Policy Issues, Commission Research Paper (2001). Much of the discussion in this chapter draws on these publications.

241 High Court Judicial Review Record Number 38JR/2000

242 Barrett, S. (2007), ‘Regulatory Capture, Property Rights and Taxi Deregulation- A Case Study’ in European Conference of Ministers of Transport, Transport Research Centre, (De)regulation of the Taxi Industry, Report of the 133rd Roundtable on Transport Economics, p. 137

243 Forsyth, P., ‘Structural Change: objectives, evaluation and incentives, in Productivity Commission, Structural Adjustment — Exploring the Policy Issues, Workshop Proceedings, Canberra, 21 May, 1999, AusInfo, p. 241

244 Barrett, S. (2007), Op. Cit., p. 139

245 See chapter 6 of the Draft Report.

246 U.S. Supreme Court, Palazzalo v. Rhode Island (2001) cited in Miceli, TJ and Segerson, K (2011), Regulatory takings, Department of Economics Working Paper series, University of Connecticut. See this paper for an economic analysis of the concept of regulatory takings.

247 Supreme Court of the State of New York, Taxicab Service Association v. the State of New York, Engoron, J, 17 July 2012

248 Department of Treasury and Finance (2003), National Competition Policy: Report for the Assessment of Victoria’s Implementation of National Competition Policy, pp.91-94

249 Department of Transport, Greater Melbourne Taxi Licence Release: Application information booklet, 2010, p. 21

250 Australian Bureau of Statistics (ABS), Catalogue 6554.0, Household Wealth and Wealth Distribution, 2009-10, Table 30

251 ABS, Catalogue 6554.0, Household Wealth and Wealth Distribution, 2009-10, Table 27. Net worth is defined as the value of a household’s assets less the value of its liabilities

252 Australian Bureau of Statistics, Catalogue 3235.0, 4 August 2011, Population by Age and Sex, Regions of Australia. The estimate as at 30 June 2010 was 4,163,273 persons aged 20 years and older.

253 National Competition Council (1999), National Competition Policy: Some Impacts on Society and the Economy, AGPS, Canberra, p. 56

254 Kaspar, W.(1999), Structural change, growth and social justice  an essay, Productivity Commission, p. 143

255 Examples of reforms that fail are highlighted in Patashnic, Eric M. (2008), Reforms at Risk – What Happens After Major Policy Changes are Enacted, Princeton University Press

256 Rouwendal, Meurs and Jorritsma (1998), Deregulation of the Dutch Taxi Sector, Paper presented at European Transport Conference. Economists employed by the VTA to comment on the release of new licences in 2009 referred to the Rouwendal et al. model in their policy analysis of new licence releases proposed at that time.

257 Glaister, S. and Beesley, M.E.(1983), Information for Regulating: the Case of Taxis, Economic Journal, Vol 93, pp. 594-615

258 In the original formulation of Rouwendal et al, driver costs are held fixed (case (a)). In Victoria, drivers are predominantly remunerated using revenue-sharing arrangements that vary with the number of passenger kilometres driven. However, drivers must also be remunerated for their time spent in the taxi and not taking passengers, so that at least part of the driver cost should be considered to be fixed with respect to passenger kilometres. The approach taken in case (b) follows the approach of the ESC in the 2008 fare review.

259 See The Hensher Group Pty Ltd (2012), Demand for Taxi and Hire Car Services in Melbourne – Prepared for the Taxi Industry Inquiry, Melbourne

260 Ibid.

261 For example, in the 1999 KPMG report, the size of the loss was estimated by calculating a ‘competitive price’ for taxi services and measuring the gains and losses to consumers and producers at this new price (which removed the licence value from the average price). A similar exercise was undertaken in the ESC’s 2008 fare review and in Gaunt, C. and Black, T. (1996), ‘The economic cost of taxi-cab regulation: the case of Brisbane’ in Economic Analysis & Policy, vol. 26, no. 1, March 1996, pp.45-58

262 In Abelson (2010) a different approach is taken that draws on the concept of generalised cost that is often employed in transport economics. The demand for taxi trips is shown as a function of generalised cost, which is the sum of the fare and the user cost of waiting time. Abelson estimates potential efficiency gains of over $265 million per annum. See Abelson, Peter (2010), ‘The High Cost of Taxi Regulation, with Special Reference to Sydney’, Agenda, Volume 17, No. 2

263 See Figure 5.17 in the Draft Report.

264 The lesser figure is based on valuing the licence at its historic yield value of six per cent; the higher value takes into account a discount rate of eight per cent and factors in growth in assignment returns at 3.5 per cent per year.

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