Financing the Gig Economy

Abstract

Unlike traditional firm production, gig economy workers provide their own physical capital. As a consequence, the low‐income households for whom gig economy opportunities are most valuable often borrow to participate. In the context of ride‐share, difference‐in‐difference analysis reveals increased vehicle purchases, borrowing, utilization, and employment around entry, but financially constrained individuals cannot participate. To assess the equilibrium importance of financing, I build and estimate a structural model of the gig economy. Access to finance proves critical for the gig economy's growth: without finance, equilibrium quantities would be 40% lower and prices 90% higher, and only higher‐income households could participate as drivers.This article is protected by copyright. All rights reserved