How much is Sharing Economy Contributing to GDP?

The sharing economy revolves around online platforms activity. It is based on sharing underutilized resources, for a fee or for free, on one-to-one basis. Sharing economy encompasses household items, cars, land use.

Normally, the rates are determined on technology platforms via the software that connects supply to demand. Most times, the platforms get their cut and the seller goes with the rest.

It’s necessary for a government to include the cost of the transactions in sharing economy, when calculating Gross Domestic Product (GDP). As GDP indicates investment and consumption and government expenses.

Below are four ways of measuring value not shown in GDP, in the sharing economy:

  • Uncounted economic gains:

Some discrete goods and services do have market value. Its economic activity gives rise to output that aren’t recorded in GDP. These include home improvements, gardening and childcare. This is the same way that sharing economy produces unseen economic value. It also opens people up to other parts of the economy. The individual gains though, as the individual gets to consume goods that were once beyond their reach.

  • Better use of environmental resources:

The sharing economy has long been in existence. It owes its resurgence to the Internet. As it enables transaction costs to be reduced, whilst increasing options with excess capacity. Peak load events such as the Olympics, benefit from this. It also helps to eliminate waste for the good of the environment.

  • Increased personal well-being:

In all its measure, GDP ignores social progress as a measure of well being. Which includes quality of life factors such as social and psychological health. Pertaining to sharing economy, its components are not part of calculating value. An economy that has high social sharing has high value too. But it doesn’t reflect on known economic indicators.

  • Higher option value and consumer surplus:

Two interconnected concepts of value in economics which apply to sharing economy but can’t be seen by GDP are option value and consumer surplus. Option value is one that is placed on people’s willingness to make payments for the maintenance of public utilities even if they might never use it. Consumer surplus is the difference between what the consumers are willing to pay for and what they actually pay.

What to do?

Diane Coyle has argued: “the sharing economy is blurring the conventional boundary between ‘the economy’ and everyday life; understanding this is vital if governments are to develop policies that enable the economy to grow and people to work and earn as they want to”. Despite all the benefits that can’t be captured by GDP, risks such as corporate tax, social protection, and welfare still abound. Hence, Governments must ensure that everyone benefits from the value created. Suggestions have been made that using labor force surveys and big data techniques would help in understanding how people engage in social sharing. The European Commission is also taking steps that include environmental and social aspects in measures of economic progress, such as for development and happiness. In all, “statisticians and economists should think more deeply about what is meant by “the economy” in the twenty-first century”. That way they might be able to discover new technological means to measure it.


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