Demand Estimation of Metro Usage in Mexico City

The results from both time series and panel cointegration models are compared to estimate the effect that fares, income, quality of service and fuel prices have on the demand for the Mexico City metro in the period 1980-2005. Both approaches show that fares and fuel prices are not cointegrated with metro patronage, income and quality of service. The zero patronage response to fares suggests that either the vast majority of metro riders are transit dependent, or fare levels are too low relative to incomes that marginal changes do not affect patronage. The results also show that income elasticities are negative and close to unity in the long run, whilst service elasticities, measured by train kilometers operated per capita, have a positive but less than proportional effect on demand. Thus, service quality may need to improve proportionally more than income to maintain current patronage levels. Therefore, if a desired policy is to attract drivers to public transport, improvements in quality of service must be achieved rather than a reduction in fares. Likewise, if the aim is to improve the finances of the Mexico City metro, marginal fare increases may lead to higher revenue with no negative effects on patronage.