The Emergence of the Sharing Economy: Implications for Development

Abstract

With the spread of internet-based technologies, the sharing economy is emerging as a new and rapidly growing sector of the economy. This sector offers transformative potential for many other sectors of the economy, and possibilities for new economic activity and growth in the developing world. The sharing economy is a misnomer, as while there are possibilities for more cooperative economic approaches, the primary emphasis is on the reduction of transaction costs including the elimination of middlemen in sales between a good/service provider and a customer. In this introductory article to the special edition, we provide an overview of both the positive and negative potential for the contribution of the sharing economy to development. On the one hand, we find that the reduction in transactions costs and the low price of mobiles improves access to goods and services, and reduces the need for economies of scale for marginalized groups who lack access to capital and infrastructure. However, we point to the real obstacles that the poor experience in using internet-based platforms to start businesses or accumulate capital. We discuss the potential for labour substitution of traditional service providers, such as taxi drivers. In juxtaposition to some of its claimants, we find that the sharing economy changes the nature of institutional, regulatory and promotional challenges by the state and social groups, rather than reducing the need for them.