Empowerment or substitution? Entry of Platform-based Sharing Economy on the Local Labor Markets

Digitalization has significantly changed the way individuals work for a couple of decades. The emergence and expansion of sharing economy enabled by information technology have fundamentally changed the traditional business models. In this paper, we examine the impacts of the sharing economy platforms (specifically, Uber) on labor force participation, unemployment rate, supply, and wage of low-skilled workers. Combining a data set of Uber entry time and several microdata sets, we utilize a difference-in-differences method to investigate whether the above measures before and after Uber entry are significantly different across the metropolitan areas. Our empirical findings reveal that the ridesharing platform Uber increases the labor force participation, and decreases the unemployment rate of people below poverty level. In addition, we also find evidence of a shift in the supply of labors from low-skill jobs in conventional industries to the sharing economy sector. To further access the robustness of the results, we perform additional analyses include the use of alternative measures, the relative time model and the placebo test.