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Ride-sharing services save lives, study of Uber finds

July 31, 2015

For more information, contact: Ben Haimowitz, (718) 398-7642, press@aom.org

It reveals 3.6%-5.6% drop in rate of car deaths involving drinking

With lawsuits in San Francisco, political opposition in New York City, bans on the app across Spain, driver protests in London, and vehicles overturned in Paris, the leadership of the ride-sharing service Uber has lately had its hands full making the case for its revolutionary business model. Now a new study may make this task easier in one regard: according to the new research, Uber and other ride-sharing services not only provide new ways of getting around but literally save lives. 

A study to be presented at the forthcoming annual meeting of the Academy of Management (Vancouver, British Columbia, Aug. 9-11) finds that the introduction of the UberX service in California locales in recent years was associated with a 3.6% to 5.6% drop in the rate of vehicular fatalities resulting from accidents in which alcohol was a factor. 

UberX is the company's personalized service in which drivers provide transportation in their private vehicles at prices 20% to 30% below those of traditional cabs. 

Low price was a critical factor in vehicular homicide reduction, the study finds, since the introduction of UberBlack, a town-car service that costs about 20% to 30% more than cabs had no significant effect on the incidence of deaths. UberBlack service was initiated in California in 2009 and UberX service in 2012, with the study covering data through September 2014. 

In the words of the paper, "With more than 1,000 deaths occurring in California due to alcohol-related car crashes every year, this represents a substantial opportunity to improve public welfare and save lives."  

A dds Brad N. Greenwood of Temple University's Fox School of Business, who carried out the research with Fox colleague Sunil Wattal. "Our results suggest that a lot of people who were out drinking decided not to drive their cars because UberX was available at the right price."  

The authors’ 3.6% estimate for reduction in alcohol-related vehicular deaths is calculated from quarterly changes in locales where UberX was introduced compared with changes in the rest of the state. The estimate of 5.6%, calculated from a smaller sample, comes from comparing rate changes in Uber townships with those in non-Uber townships similar to them in size and per capita income. 

Based on their 3.6% estimate, Greenwood and Wattal observe that "with more than 13,000 deaths occurring nationally each year due to alcohol-related car crashes at a cost of $37 billion, results indicate that a complete implementation of UberX would create a public welfare of over $1.3 billion to American taxpayers and save roughly 500 lives annually. Moreover, with costs to the individual (e.g. court costs, insurance rate increases, loss of income) usually totaling between $5,000 and $12,000 for the first DUI offence, significant welfare accrues to the individual as well by leveraging these services." 

The professors are not the first to investigate the effect of ride-sharing services on the incidence of driving under the influence. They note that "preliminary analysis conducted by Uber and several industry analysts suggests that introduction of Uber and similar services has a negative influence on DUI arrests. However, these studies have been questioned on several grounds, including involvement of Uber in the data analysis, methodological rigor...and the presence of confounding factors." 

The new study "exploits a natural experiment, the introduction of the ride-sharing service of Uber into the state of California...using hand-collected data from the California Highway Patrol safety and crash dataset and a custom webscraper which indicates when each service entered a geographic area in California...Although California is a single state, the fact that it is the most populated state in the nation and has had Uber service the longest makes it ideal for testing our research question." 

Findings were based on data concerning alcohol-related vehicular fatalities from 540 townships over the course of the 23 quarters from January 2009 through September 2014, information covering 12,420 township-quarters. "Results," the professors write, "are robust to a variety of estimations and operationalizations." 

The factor of price in reducing deaths was found not only in analysis of this data overall but in probing the effect of surge pricing, the increase in price Uber imposes at times when the number of its drivers on the road does not suffice to meet demand. Analyzing rates of alcohol-related vehicular fatalities on weekend nights and major holidays – that is, times when surge pricing is most likely — the professors find no significant change in death rates following the introduction of UberX.  

They find, too, that the effect of Uber entry is greater in large and medium-sized cities than it is in less populous locales, perhaps "because smaller townships have too small a population to garner significant attention from Uber drivers." 

In conclusion, the professors suggest that the paper's findings have ramifications that go beyond drunken driving to the viability of the sharing economy. In their words, "To the degree that vendors such as AirBnB, Uber, and Lyft have been proposed as solutions to many market failures our work provides cautionary evidence that consumers will continue to use established vendors when prices increase. As a result, while lower priced hotels and car services may be usurped by these emerging business models, minimal evidence exists to suggest that premium vendors will be displaced." 

The paper, entitled “Show Me the Way to Go Home: An Empirical Investigation of Ride-Sharing and Alcohol-Related Motor Vehicle Homicide," will be as among the thousands of research reports presented at the 2,150 sessions of the Academy of Management annual meeting, in Vancouver, British Columbia, from August 7th through 11th. Founded in 1936, the Academy of Management is the largest organization in the world devoted to management research and teaching. It has about 20,000 members in 114 countries. This year's annual meeting will draw some 11,000 scholars and practitioners for sessions on a host of subjects relating to business strategy, organizational behavior, corporate governance, careers, human resources, technology development, and other management-related topics. 

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