KDI - Korea Development Institute - RESEARCH - Research Areas

Regulation

Entire

Market Regulation: Entry, Pricing, Quality Regulation
Business Regulation: Sale, Qualification Restriction
Regulatory Studies: Network Industries
Regulatory Studies: Service Industries
General(Other)

Summary

KDI FOCUS Government Policy for the Stable Growth of the Sharing Economy

□ 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.

Summary

Research Monograph KOR An Economic Analysis of the Sharing Economy: Benefits, Concerns and Policy Implications

This study closely analyzes key issues of the sharing economy, and based on the results, implications are presented for government policies to support its stable growth. In particular, theoretical and empirical analyses of the benefits and concerns of the sharing economy were conducted to derive policy and institutional measures that could help to achieve the expected benefits and respond appropriately to any concerns.

This monograph consist of four chapters. Chapter 1 first establishes the concept of the sharing economy, discusses its overall status and economic issues, and then analyzes how its benefits and concerns are realized in Korea by conducting a extensive survey regarding the awareness of and experience with the sharing economy. Chapter 2 theoretically analyzes the economic effects of the sharing economy and derives a general institutional framework. Next, Chapters 3 and 4 examine in detail accommodation sharing and crowdfunding respectively. In each chapter, an empirical analysis is conducted focusing on the most prominent concern in respective sector―in the case of accommodation sharing, crowding out of the existing industry and in the case of crowdfunding, transactions risks including weak trust in platforms―and desirable policy directions are derived based on the comparison analysis of institutionalization cases of major countries.

The main results and policy implications of this study are as follows. The proliferation of the sharing economy is a global trend, and is accompanied by diverse expected benefits such as creation of new transactions, promotional and market testing opportunities, vitalization of local economy, reduction in environmental costs and so on. However, there are also risk factors, including the crowding out of existing transactions and transaction and social risks. The sharing economy is expected to contribute to the enhancement of social welfare if risk factors can be properly controlled, so the government must lay the institutional foundations to support its stable growth. This will entail a new approach that takes into account its uniqueness, and each sector requires specific action plans due to differences in development status, prospect and key issues.

This study concludes that regulations are recommended to be linked to the volume of transactions for the sharing economy when the unique characteristics of non-professional, peer-to-peer transactions are considered in tandem with regulatory equity between existing and sharing economy suppliers. In other words, a transaction limit should 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. However, the enforcement of transaction volume-based regulations involves difficulties. To secure regulatory effectiveness, pertinent obligations including information reporting requirements must be imposed on sharing platforms, which is also necessary to properly respond to transaction risks.

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