Local Startup Rates and the Gig Economy

I’ve long written and spoken about the important role of independent and gig economy workers as part of a region’s core base of entrepreneurs.  While many of these workers are simply pursuing additional income, a large share are building businesses too.  Yet, for a variety of reasons, they may not show up in the data, and thus we don’t fully understand their potential impacts on local economies.  A new National Bureau of Economic Research paper offers a good look at these impacts.  “Launching with a Parachute” investigates how the introduction of gig economy platforms affects business startup rates.  (The researchers use the excellent Startup Cartography Project for their data.  Check the project website for other useful work as well.) They find that the introduction of the gig economy to a community increases the local startup rate by around five percent, and also increases local lending to new businesses.  The authors suggest that supplemental income from gig economy work offers “insurance” and additional resources that provide a “parachute” for those considering business startup.  In effect, the gig economy work provides income and perhaps a test bed for business ideas and concepts too.  The authors also find that these effects on startup rates are most pronounced in areas with lower incomes and higher credit constraints.  As we continue to slog our way out of the current economic crisis, we may find that gig work will have an even larger impact on future startup activity.

This entry was posted in Current News. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>