Launching with a Parachute: The Gig Economy and Entrepreneurial Entry

John Barrios, Yael Hochberg (hochberg@rice.edu) and Hanyi Yi (hanyi.yi@rice.edu)
Additional contact information
Yael Hochberg: Rice University and NBER
Hanyi Yi: Rice University

No 2020-21, Working Papers from Becker Friedman Institute for Research In Economics

Abstract: The introduction of the gig economy creates opportunities for would-be entrepreneurs to supplement their income indownside 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 ride hailing 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 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.

JEL-codes: G39 L26 O3 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2020
New Economics Papers: this item is included in nep-ent, nep-fdg, nep-ias and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://repec.bfi.uchicago.edu/RePEc/pdfs/BFI_WP_202021.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bfi:wpaper:2020-21

Access Statistics for this paper

More papers in Working Papers from Becker Friedman Institute for Research In Economics Contact information at EDIRC.
Bibliographic data for series maintained by Toni Shears (bfi@uchicago.edu this e-mail address is bad, please contact repec@repec.org).