Resurrecting Dead Capital: The Sharing Economy, Entrepreneurship, and Job Creation

Abstract

This paper examines how the sharing economy affects entrepreneurship. Using Airbnb’s penetration across counties as a proxy for the growth of the sharing economy and venture capital infusions interacted with local tourism as an instrument, we find that Airbnb spurs local firm creation. A plausible underlying channel is that Airbnb facilitates short-term rental, which relaxes the financial constraint of potential entrepreneurs. Increases in entrepreneurs’ risk tolerance, enhanced local demand, and increased collateral value caused by Airbnb penetration do not appear to explain our main findings. Our paper sheds new light on the real effects of the sharing economy.

Keywords: Airbnb, sharing economy, entrepreneurship, financial constraints, job creation

JEL Classification: L26, L85, L86, M13