Tax-Induced Inequalities in the Sharing Economy

57 Pages Posted: 23 May 2019 Last revised: 5 Aug 2021

See all articles by Yao Cui

Yao Cui

Cornell University - Samuel Curtis Johnson Graduate School of Management

Andrew M. Davis

Samuel Curtis Johnson Graduate School of Management, Cornell University

Date Written: August 4, 2021

Abstract

The growth of sharing economy marketplaces like Airbnb has generated discussions on their socioeconomic impact and lack of regulation. As a result, most major cities in the United States have started to collect an “occupancy tax” for Airbnb bookings. In this study, we investigate the heterogeneous treatment effects of the occupancy tax policy on Airbnb listings, using a combination of a generalized causal forest methodology and a difference-in-differences framework. While we find that the introduction of the tax significantly reduces both listing revenues and sales, more importantly, these effects are disproportionately more pronounced for residential hosts with single shared-space (“non-target”) listings, versus commercial hosts with multiple properties or entire-space (“target”) listings. We further show that this unintended consequence is caused by customers’ discriminatory tax aversion against non-target listings. We then leverage these empirical results by prescribing how hosts should optimally set prices in response to the occupancy tax and also identify the discriminatory tax rates that would equalize the tax’s effect across non-target and target listings.

Keywords: sharing economy, Airbnb, tax, machine learning, causal forest, difference-in-differences, heterogeneous treatment effect, prescriptive analytics

JEL Classification: C23, D04, H23, L83

Suggested Citation

Cui, Yao and Davis, Andrew M., Tax-Induced Inequalities in the Sharing Economy (August 4, 2021). Available at SSRN: https://ssrn.com/abstract=3376992 or http://dx.doi.org/10.2139/ssrn.3376992

Yao Cui (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

Andrew M. Davis

Samuel Curtis Johnson Graduate School of Management, Cornell University ( email )

Ithaca, NY 14853
United States

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