Shared Prosperity (or Lack Thereof) in the Sharing Economy

54 Pages Posted: 30 May 2018 Last revised: 7 Jun 2018

Mohammed Alyakoob

Purdue University - Krannert School of Management

Mohammad Saifur Rahman

Purdue University - Krannert School of Management

Date Written: May 17, 2018

Abstract

This paper examines the heterogeneous economic spillover effects of a home sharing platform---Airbnb---on the growth of a complimentary local service---restaurants. By circumventing traditional land-use regulation and providing access to underutilized inventory, Airbnb is attracting the visitors of a city to vicinities that are not traditional tourist destinations. Although visitors generally bring significant spending power, it is, however, not clear if the visitors use Airbnb primarily for lodging, thus, not contributing to the local economy. To evaluate this, we focus on the impact of Airbnb on the employment growth of New York City (NYC) restaurants. Our results indicate that if the intensity of Airbnb activity (Airbnb reviews per household) increases by 2%, the restaurant employment in that neighborhood grows by approximately 3%. We use algorithmic matching in combination with a difference-in-difference (DID) specification that utilizes the spatial and temporal differences in Airbnb entry into NYC neighborhoods. We validate the underlying mechanism behind this result by evaluating the impact of Airbnb on Yelp visitor reviews. In particular, neighborhoods with increasing Airbnb activity also experience a surge in their share of NYC visitor reviews. This result is further validated by evaluating the impact of a unique Airbnb neighborhood level policy recently implemented in New Orleans. We also investigate the role of demographics and market concentration in driving the variation. Notably, restaurants in areas with a relatively high number of Black residents do not benefit from the economic spillover of Airbnb activity.

Keywords: The Sharing Economy, Employment Growth, Racial Disparity

JEL Classification: L53, L83, J15, J21

Suggested Citation

Alyakoob, Mohammed and Rahman, Mohammad Saifur, Shared Prosperity (or Lack Thereof) in the Sharing Economy (May 17, 2018). Available at SSRN: https://ssrn.com/abstract=3180278 or http://dx.doi.org/10.2139/ssrn.3180278

Mohammed Alyakoob (Contact Author)

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Mohammad Saifur Rahman

Purdue University - Krannert School of Management ( email )

403 W. State St
West Lafayette, IN 47907
United States
765-494-4464 (Phone)

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