Sharing economy reshapes markets, as complaints rise

Want to make a bit of extra cash driving strangers around in your car, taking care of someone's dog, renting your apartment or cooking a meal? Welcome to the sharing economy. With Internet-based apps and services like Uber, Airbnb and others, you make money and the consumer saves. So, is it a win-win situation? That is the multibillion-dollar question. The new way of operating has been reshaping entire economic sectors, with the promise of improved efficiency and more flexibility. The spectacular rise of ride-sharing, home-sharing and other services have turned these economic models upside down, and has fueled complaints that these services effectively skirt rules on safety, consumer protection and labor rights. However, some economists say this "peer-to-peer" model offers numerous advantages by tapping underutilized resources.

The sharing economy "can improve consumer welfare by offering new innovations, more choices, more service differentiation, better prices and higher quality services," said a study by George Mason University economists.

Researcher Christopher Koopman, an author of the George Mason University report, said the sharing economy "allows people to take idle capital and turn them into revenue sources. People are taking spare bedroom, cars, tools they are not using and becoming their own entrepreneurs."

There is no official definition of the sharing economy. Some include online delivery services like Instacart and Postmates; neighbor-sharing platforms like Peerby; the pet-sitting service DogVacay; and the restroom service Airpnp.

The research firm PwC estimates that five sharing economy segments - finance, online staffing, accommodation, car sharing and music or video streaming - could be worth $335 billion by 2025, up from just $15 billion today. "The sharing economy will be part of the overall economy going forward," said technology strategist Mary Jesse in a blog post. "Some industries - like taxi services in transportation and B&B rentals in travel - will be completed transformed, while others, such as financial services, will be only peripherally impacted. This is part of the 'technology revolution,' as well as a new norm."

Arun Sundararajan, a New York University economist who studies the sharing economy, told a January congressional hearing that "this transition will have a positive impact on economic growth and welfare, by stimulating new consumption, by raising productivity and by catalyzing individual innovation and entrepreneurship."

Uber is the best-known platform in the sharing economy, having reached a valuation of $40 billion while expanding to more than 200 cities in 54 countries. But Uber and similar services like Lyft and Sidecar have fueled heated protests from taxi drivers, who complain that the new entrants do not have to meet the same requirements for licensing, safety and insurance, making the competition unfair. Airbnb, the leading online platform for peer-to-peer lodging, has sparked similar complaints from the hotel sector. Responding to complaints, the San Francisco startup recently expanded efforts to collect lodging taxes in some locations. Other services in the sharing economy include "Feastly," which allows individuals to cook meals for customers; Vinted, a marketplace for unwanted clothing; and Lending Club, one of several platforms for peer-to-peer loans. From the labor perspective, the new digital platforms are touted as ways to encourage more people to become entrepreneurs. A study commissioned by Uber and led by Princeton University economist Alan Kreuger, which surveyed U.S. drivers for Uber, found they earned above-average wages and were generally satisfied with the arrangement. The study found that Uber drivers earned around $6 per hour more than traditional taxi drivers, but noted that comparison is difficult because Uber drivers must also pay certain expenses.