Research / BFI Working PaperMar 19, 2020

Launching with a Parachute: The Gig Economy and Entrepreneurial Entry

John Barrios, Yael V. Hochberg, Hanyi Yi

The introduction of the gig economy creates opportunities for would-be entrepreneurs to supplement their income in downside states of the world, and provides insurance in the form of an income fallback in the event of failure. We present a conceptual framework supporting the notion that the gig economy may serve as an income supplement and as insurance against entrepreneurial-related income volatility, and utilize the arrival of the on-demand, platform-enabled gig economy in the form of the staggered rollout of ridehailing in U.S. cities to examine the effect of the arrival of the gig economy on entrepreneurial entry. The introduction of gig opportunities is associated with an increase of ~5% in the number of new business registrations in the local area, and a correspondingly-sized increase in small business lending to newly registered businesses. Internet searches for entrepreneurship-related keywords increase ~7%, lending further credence to the predictions of our conceptual framework. Both the income supplement and insurance channels are empirically supported: the increase in entry is larger in regions with lower average income and higher credit constraints, as well as in locations with higher ex ante economic uncertainty regarding future wage levels and wage growth.

More Research From These Scholars

BFI Working Paper Apr 29, 2021

Tax Planning Knowledge Diffusion via the Labor Market

John Barrios, John Gallemore
Topics:  Employment & Wages, Tax & Budget
BFI Working Paper May 15, 2018

Occupational Licensing and Accountant Quality: Evidence from the 150-Hour Rule

John Barrios
Topics:  Employment & Wages, Financial Markets, Fiscal Studies, Monetary Policy, Industrial Organization
BFI Working Paper Mar 17, 2020

Boards of a Feather: Homophily in Foreign Director Appointments Around the World

John Barrios, Pietro A. Bianchi, Helena Isidro, Dhananjay Nanda
Topics:  Uncategorized