Abbey Stemler, Indiana University
Innovation and Effective Regulation: A Global Survey
Innovations within the sharing economy have transformed the way people do most everything from getting dinner to borrowing money. It also has changed our thinking about how common market failures can and should be addressed. For example, reputation systems incorporated into sharing economy platforms collect and organize user feedback to reduce harms associated with asymmetric information and ensure consumer safety.
Despite its many benefits and advances, however, the sharing economy has created a dizzying array of problems for communities of all sizes and throughout the world—from tax evasion and pollution to price gouging, deplorable worker protections, and pervasive discrimination. The impact of these problems is exacerbated because sharing economy platforms shape-shift, move fast, and fight to avoid or find loopholes within current regulatory frameworks. As a result, platforms have distinct advantages over incumbent firms and grow unrestrained. This reality makes the gap between regulators and these pioneering platforms larger and larger.
The sharing economy is important to study and understand because it will continue to grow and impact communities and countries around the world. Estimates suggest that half of the US population will work as freelancers, mostly in the sharing economy, by 2027. And in China, estimates show that its sharing economy, fen xiang, will represent twenty percent of the country’s GDP by 2025. We can thus surmise that countries will continue to be impacted in meaningful and often frustrating ways by the sharing economy.
Despite its size and associated problems, there is a severe lack of empirical and comprehensive research as to how regulators do should respond to the sharing economy, especially from an international perspective. This article fills that gap. It provides needed and verifiable information for regulators by examining the natural regulatory experiments occurring throughout the world. More broadly, this article helps provide regulators with a replicable framework to address the future’s unforeseeable regulatory disruptions.
Simply put, the overarching question addressed in this article is: What are the most effective regulatory interventions to mitigate the costs of the sharing economy and encourage innovation? From this, several corollary questions emerge: (1) What are the various problems created by the sharing economy? (2) In a given country, what level of government responds to these problems? (3) What are the responses? (4) Which of those are effective (e.g., those responses that fix the problem)? (5) Which effective responses encourage innovation rather than hinder it? To answer these questions, the article presents research from a methodical survey of over fifty developing and developed countries. As a result, this groundbreaking report identifies some of the most successful regulatory responses for problems produced by the sharing economy.