Taxi License Premiums in Hong Kong: Can Their Fluctuations be Explained by Taxi as a Mode of Public Transport?

ABSTRACT Under the current taxi licensing system in Hong Kong, holders of taxi licenses are given perpetual operating right in the taxi business. Since 1995, the government has not issued any new taxi licenses. Against this background, the freely traded taxi licenses are often held as an investment asset. When there are active speculative activities, the taxi license premium may be affected more by the general economic conditions than the demand for taxi services and/or changes in the levels of taxi services. In this paper, we use the backward and forward multiple regression methods to develop the level-of-taxi-services (LOTS) and economy-wide (EW) models for understanding fluctuations in the premiums of urban and New Territories (NT) taxis from 1986 to 2002. The results suggest that variations of both urban and NT taxi license premiums can be better accounted for by factors of the EW than the LOTS models. When the policymakers review policy with regard to the taxi license, it is important for them to take a closer look not only at taxi-related factors but also at the economy-wide factors.