The Empowering and Competition Effects of the Platform-Based Sharing Economy on the Supply and Demand Sides of the Labor Market

The sharing economy has fundamentally changed the way many individuals work. In this paper, we study the impact of the entry of a major ridesharing platform into U.S. Metropolitan Statistical Areas (MSAs), on the supply and demand sides of the labor market. Leveraging the difference-in-differences (DID) research design and a data set combining multiple U.S. Census archival sources, we exploit the variation in labor market metrics before and after Uber’s entry into the MSAs. Our empirical findings reveal that the introduction of the ridesharing platform has an empowering effect on workers (the supply side of the labor market) and a competition effect on traditional jobs (the demand side of the labor market). Specifically, Uber’s entry into the MSAs increases labor force participation, decreases the unemployment rate of residents living below the poverty level, and improves the employment and financial status of low-income workers. In addition, Uber’s entry reduces the employment number and increases wages of conventional low-skill and/or low-wage jobs. This paper provides empirical evidence of the impact of a digital sharing economy platform on the labor market and suggests that policymakers and platform operators should account for this broader impact when they devise policies and make strategic decisions.