July 25, 2018 Print

Peer-to-peer services, like Uber and Airbnb, make up a market known as the sharing economy. Because of its novelty, much information surrounding the sharing economy is unknown. Timbro, an Atlas Network partner and the largest Nordic free-market think tank, has released the Timbro Sharing Economy Index (TSEI), which estimates the size of the sharing economy per country and aims to enliven the discussion around this growing field of exchange.

“The Timbro Sharing Economy Index is the first global index of the sharing economy,” says head researcher Alexander Funcke, a postdoctoral fellow at the University of Pennsylvania. “The index has been compiled using traffic volume data and scraped data, and provides unique insight into the driving factors behind the peer-to-peer economy.”

Previous similar reports tended to use hazy definitions for “sharing economy” services. The so-called “gig economy,” which refers to businesses contracting with independent workers for short spans of time, is only a subset of the broader sharing economy. Timbro’s definition of “sharing economy” has three necessary conditions:  ad-hoc matchmaking, microtransactions, and a decentralized supply. Using these criteria, Timbro collected data for 286 services in 208 countries. “Web scraping” techniques provided a complete count of active suppliers for 23 of these 286 services.

Timbro uses their own definition to measure the sharing economy.

“Generally, countries with a mature internet infrastructure and a tourism-fueled economy have large sharing economies,” continues Funcke. “Consider Iceland. As the Icelandic economy was recovering from the financial crisis, the country saw a spike in tourism. The sharing economy grew rapidly to meet the demand, in a way that is hard to imagine a traditional tourist industry could have done.”

Iceland, the Turks and Caicos Islands, Montenegro, Malta, and New Zealand top Timbro’s index. Airbnb is the largest company in the data set, with nearly 1.5 million active suppliers in an average week. One third of the 286 sharing economy services supply housing. One half are freelance business services like Upwork, which connects businesses and independent professionals individuals to do work remotely.

Timbro sought to answer questions related to the fundamental nature of the sharing economy. If the sharing economy exists to shirk taxation and government regulation, then sharing economy service usage should negatively correlate with economic freedom. However, if the sharing economy is a new form of business, then service usage should positively correlate with economic freedom. The data supports the latter hypothesis. Furthermore, the findings point to a positive association between the sharing economy and the rule of law.

“The study shows that the same economic freedom indicators that predict a large traditional economy are also significant predictors for the size of the sharing economy,” says Karin Svanborg-Sjövall, CEO of Timbro. “This goes against the hypothesis that the sharing economy mainly serves to avoid taxes and regulations, as we would then expect a larger sharing economy in countries where the providers have more taxes and regulations to avoid.”

The graph charts the relationship between economic freedom and sharing economy usage (TSEI). The table shows the correlation between different variables and TSEI.

Timbro also finds that the use of sharing economy services is unrelated to social trust. This finding does not support the view that high social trust is necessary for a sharing economy. However, the index’s researchers, Funcke and Andreas Bergh, provide a potential explanation. They suggest that the value of reputation and ranking systems is higher in countries where people do not trust strangers. The study also points to a new area of research worth pursuing: whether the sharing economy increases social trust.

The study also examines the conditions that allow a sharing economy to thrive. Timbro finds that sharing economy size is significantly related to regulatory freedom and the share of the population with broadband even when controlling for social trust, schooling, and demography. A strong positive correlation exists between the sharing economy size and broadband access. A country’s GDP per capita accounts for 61 percent of broadband access. Furthermore, a weak positive correlation exists between regulatory freedom and sharing economy size. When controlling for the effect of broadband access, sharing economy usage is higher in countries with lower social trust and more regulatory freedom.

The left graph measures broadband access, while the right graph measures the correlation between other variables and broadband access. 

Timbro is currently seeking organizations to help it set up local events both in the U.S. and abroad in exchange for becoming official partners and also mentioned in the report, as well as getting access to Timbro’s data set. All inquiries should be addressed to Karin Svanborg-Sjövall at karin.svanborg.sjovall@timbro.se.

Watch the launch of the index live today at 12 p.m. from Americans for Tax Reform.

Read the Timbro Sharing Economy Index (TSEI).