Shared Prosperity (or Lack Thereof) in the Sharing Economy
54 Pages Posted: 30 May 2018 Last revised: 7 Jun 2018
Date Written: May 17, 2018
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: Suggested Citation