Centre for Economic and Regional Studies Hungarian Academy of Sciences Centre of Excellence

Ride-share matching algorithms generate income inequality
/társszerző: Hannák Anikó/

Abstract
Despite the potential of online sharing economy platforms such as Uber, Lyft, or Foodora to
democratize the labor market, these services are often accused of fostering unfair working conditions and low wages. These problems have been recognized by researchers and regulators but the size and complexity of these socio-technical systems, combined with the lack of transparency about algorithmic practices, makes it difficult to understand system dynamics and large-scale behavior. This paper combines approaches from complex systems and algorithmic fairness to investigate the effect of algorithm design decisions on wage inequality in ride-hailing markets. We first present a computational model that includes conditions about locations of drivers and passengers, traffic, the layout of the city, and the algorithm that matches requests with drivers.
We calibrate the model with parameters derived from empirical data. Our simulations show that
small changes in the system parameters can cause large deviations in the income distributions
of drivers, leading to a highly unpredictable system which often distributes vastly different incomes to identically performing drivers. As suggested by recent studies about feedback loops in algorithmic systems, these initial income differences can result in enforced and long-term wage gaps.