Abstract: We collected data on over 1000 taxicab rides in New Haven, CT in 2001. After controlling for a host of other variables, we find two potential racial disparities in tipping: (1) African-American cab drivers were tipped approximately one-third less than white cab drivers; and (2) African-American passengers tipped approximately one-half the amount of white passengers (African-American passengers are 3.7 times more likely than white passengers to leave no tip).
Many studies have documented seller discrimination against consumers, but this study tests and finds that consumers discriminate based on the seller's race. African-American passengers also participated in the racial discrimination. While African-American passengers generally tipped less, they also tipped black drivers approximately one-third less than they tipped white drivers.
The finding that African-American passengers tend to tip less may not be robust to including better controls for passenger social class. But it is still possible to test for the racialized inference that cab drivers (who also could not directly observe passenger income) might make. Regressions suggest that a "rational" statistical discriminator would expect African Americans to tip 56.5% less than white passengers.
These findings suggest that government-mandated tipping (via a "tip included" decal) might reduce two different types of disparate treatment. First, mandated tipping would directly reduce the passenger discrimination against black drivers documented in this study. Second, mandated tipping might indirectly reduce the widely-documented tendency of drivers to refuse to pick up black passengers.