Public and Private Transit : Evidence from Lagos

Overview & Synopsis

Private minibuses dominate transport in many developing country cities. They serve 62% of motorized trips in Lagos, the largest city in sub-Saharan Africa. This paper uses original panel data to measure how private minibuses respond to the rollout of a new public bus network. When the government enters a route, minibuses depart less frequently, drivers’ profits fall, and drivers switch to connected routes, reducing prices. A custom application was developed to estimate how commuters trade off prices and wait times using a RCT. The private response harms commuters on treated routes, who wait longer, but benefits those on connected routes, who face only lower prices. The disciplining effect of the new system on prices dominates on average, so that commuters overall benefit from the introduction of public transit, while minibus drivers lose revenue. Over one quarter of the commute welfare gains of building the public transit system arise from the response of private transit. Drivers lose welfare equal to 60% of the commuter gains.