Release of medium-to-long term outlook on respective agenda based
on the analysis of pending macroeconomic issues



Government Policy for the Stable Growth of the Sharing Economy

cover image
  • Author KIM. Minjung
  • Date 2017/07/11
  • Series No. KDI FOCUS No. 83, eng
  • Language English
SUMMARY □ The sharing economy is expected to contribute to the enhancement of social welfare with its wide range of benefits, including creation of new transactions and promotional and market testing opportunities, if risk factors such as crowding out of existing transactions and transaction and social risks can be properly controlled. Accordingly, an institutional framework is needed to support the stable growth of the sharing economy and the unique characteristics of non-professional, peer-to-peer transactions should be reflected in tandem with regulatory equity between existing and sharing economy suppliers. For this, transaction volume-based regulations are recommended. Furthermore, to secure regulatory effectiveness and to alleviate transaction risks, the pertinent obligations must be imposed on sharing platforms.

- There is increasing demand for in-depth analysis of and policy response to the sharing economy which is growing fast on the back of technological advances.

- Within the concept of the sharing economy, idle assets have great significance. The sharing economy basically involves transactions between nonprofessional peers.

- Primary benefits expected from the sharing economy are creation of new transactions and resulting improvements in the welfare of sharing economy participants.

- Businesses participating in the sharing economy can also expect promotional and market testing effects.

- Other expected benefits include vitalization of local economy and reduction in environmental costs.

- The sharing economy could crowd out some existing transactions that provide similar services.

- The crowding out of existing transactions will exacerbate when regulations are applied unfairly to suppliers from existing and sharing businesses.

- The sharing economy encompasses several transaction risks including information asymmetry, uncertainty in ex-post handling and weak trust in platforms.

- Negative external effects could be triggered, marring social safety.

- In laying the institutional framework to support the stable growth of the sharing economy, the government must consider both the economy’s unique characteristics and regulatory equity.

- Transaction volume-based regulations are recommended for the sharing economy.

- To strengthen the effectiveness of transaction volume-based regulations, certain obligations must be imposed on platforms.

- As for transaction risks, government policies need to play a supplementary role while placing its focus on sharing platforms.
KDI VOD Report
With its companies earning 335 billion dollars by 2025,
the sharing economy is projected to grow to a level
similar to the traditional rental sector such as the car rental and hostel industries.

The sharing economy enables the transaction of access rights to idle assets
via an ICT platform.

It contributes to enhancing the welfare of participants
as suppliers can earn additional income,
while consumers enjoy low prices, diverse options and better convenience.

Businesses participating in the sharing economy are also provided with opportunities
to promote and test new products or business ideas without incurring substantial costs.

In addition, the sharing economy is expected to not only stimulate local economies
but also contribute to resolving environmental issues.

On the other hand,
concerns have been raised over the fact that transactions are primarily conducted
between non-professional individuals and that it is difficult to determine service quality.

For example,
there is transaction risk including criminal activity, a lack of protection mechanisms
and even possible danger to social safety.

A notable issue in introducing the sharing economy is
the conflict with existing business sectors that provide similar services.

A survey of Koreans with experience in the sharing economy
found that almost 90% of accommodation and car sharing consumers
and 60% of crowdfunding suppliers reduced their number of existing transactions.

In particular,
according to an empirical analysis on the impact of accommodation sharing
on the hotel industry,
there was a loss of approximately 0.16% in the hotel industry’s room sales
for every 10% increase in the supply of accommodation facilities via Airbnb.

if the decline in existing transactions and growth of the sharing economy are
both spurred by unfair regulations on new and traditional suppliers,
the competition may become distorted,
and result in a qualitative decline of the overall market.

businesses must be able to compete in a fair environment with regulation equity,
to ensure that the expansion of the sharing economy will benefit,
rather than impair, social welfare.

The government must lay the institutional foundations to support
the stable growth of the sharing economy.

In the process, regulations must be linked to the volume of transactions
when regulatory equity is considered in tandem with the unique characteristics
of the sharing economy.

A transaction limit must be set and those who exceed the limit
should be categorized as ‘professional, regular operators’ and be subject to
traditional supplier regulations while those who do not should be categorized as
‘non-professional, temporary operators’ and be subject to eased regulations.

Additionally, the pertinent obligations must be imposed on sharing platforms
to ensure the effectiveness of the transaction volume-based regulations
and response to transaction risks.
Go to Youtube
Related content It is directly correlated to the content.
More from this topicIt deals with the same topic of the content

No data about the same topic

KDI Research Category
Advanced search