Research
10.07.17

Unlocking the potential of the sharing economy

Johanna Mair and Georg Reischauer outline new approaches for German policymakers. 

In recent years, the sharing economy has grown dramatically. Online services like Uber and Airbnb, which broker rides in private taxis and lodging in privately owned apartments, have become global players. But they are also targets of public debate. While some praise the flexibility, low prices, and entrepreneurial opportunities, others point to precarious work conditions, unfair competition, and “sharewashing” – when traditional business practices are disguised as sharing economy models.

The German economy is also participating in these new marketplaces. Start-ups are emerging not only in hotspots like Berlin, Hamburg, and Munich, but also throughout the country. Established enterprises are also analysing opportunities and starting to experiment. For example, the Otto Group recently launched a sharing portal for TVs, tablets and washing machines.

German policymakers, on the other hand, have paid little attention to opportunities offered by the sharing economy and tend to take a reactive stance to these developments. Lawmakers in Berlin, for example, banned the use of private flats solely as short-term lodging, on grounds that it was a misappropriation of residential property for commercial use. It’s high time that German policymakers have a more nuanced understanding of what makes up the sharing economy so they can take a more pro-active stance in unlocking its potential. A one-size-fits-all approach that treats the sharing economy as homogeneous will not be capable of pinpointing and solving its many heterogeneous issues.  Our recent article on the dynamics of the sharing economy provides the grounds for such a differentiated understanding.

Specifying the sharing economy

In this article, we define some key differences and similarities between the sharing economy and the traditional economy.

The sharing economy is a web of markets in which individuals use various forms of compensation to transact the redistribution of, and access to, resources. These markets are mediated by a digital platform operated by an organisation. We identify five crucial features:

1.      Various forms of compensation are used for transactions. While money is a key form of compensation, we also observe bartering, trading, and gift giving.

2.      The locus of transactions is the market. This highlights that a sharing economy at its core is about transactions with an economic dimension – a simple but key aspect that tends to be forgotten in debates.

3.      The focus of transactions is the redistribution of resources and access to them.

4.      Individuals are the transaction partners in the sharing economy. This means that car sharing as provided by carmakers should not be considered part of the sharing economy.

5.      Transactions in the sharing economy occur via digital platforms run by organisations. These digital platforms are marketplaces that mediate transactions by matching the supply side with the demand side. More importantly, they are run by organisations. Put simply, behind any digital platform there is a sharing economy organisation running and refining it.

This nuanced view demonstrates that the sharing economy is neither completely different nor completely the same as the traditional economy. In both, transactions take place in the market. The sharing economy is narrower in scope in terms of transactions – providing only access to and redistribution of resources – and in terms of transaction partners (only individuals), transaction infrastructure and infrastructure providers. But the sharing economy allows for a broader range of compensation forms than the traditional economy. It is exactly this plurality that provides the basis for unlocking its potential.

Embracing the plurality of the sharing economy

Policymakers need to recognise that not all kinds of sharing are alike. What do a globally operating sharing economy organisation in Silicon Valley and a repair cafe in Berlin have in common? Virtually nothing – except that they are both part of the sharing economy. While this may seem obvious, the sharing economy is often discussed as if it were a homogeneous phenomenon. But it is plural. Organisations are run as non-profit and for-profit business models, and they vary in scope, from very regional to international.  While empirical insights on this plurality are only just emerging, we believe German policymakers could take some initial steps that would help address current deficits in their approach to the sharing economy.

1. Policymakers should take a decentralised stance towards the sharing economy. Rules that apply to sharing economy markets in Berlin or Munich must be different to those in rural areas. Cities especially have different conditions and potential approaches than rural areas. For example, Airbnb signed an agreement with the city of Amsterdam to collect and remit tourism taxes on behalf of hosts. Germany’s federal structure provides an ideal basis for this as it allows regional variation. A good example is “shareBW”, launched by the state of Baden-Württemberg. This competition awards ideas based on the idea-sharing economy that pay specific attention to regional needs in key areas such as energy and mobility.

2. Policymakers should work together with groups “on the ground” to identify the plurality of the sharing economy. This is more challenging than it sounds. As we illustrate in our paper, the sharing economy blurs several established categories in the economy: production and consumption, full employment and casual labour, and the private and public domain. This boundary-blurring makes it hard to assess plurality exactly. Including actors “on the ground” would help address this issue. These include start-ups and enterprises like those in the “Fachgruppe Sharing Economy” of the “Bundesverband Deutsche Startups” (working group on the sharing economy at the German Start-ups Association). Moreover, policymakers should cooperate with movements in the sharing economy such as OuiShare or Platform Cooperativism. These movements are at the forefront of developing and testing ideas for the sharing economy that pay particular attention to the public good. A good example is the “Potenzialanalyse der Share und Collaborative Economy in Berlin” (analysis of the potential of the sharing and collaborative economy in Berlin), initiated by the Berlin state government. This analysis outlined pathways for Berlin policymakers to establish the German capital internationally as a “Sharing City”, but also provided recommendations for the state, federal, and European level.

3.  Policymakers should allow experiments with actors in the sharing economy. Experiments with public-private partnerships on a small scale are especially promising. For example, the public sector could sponsor ride-sharing enterprises connected to the regional public transportation system.

These initial recommendations can help guide policymakers on their journey to unlocking the potential of the sharing economy. While this process also involves risks, policymakers must find new approaches to dealing with this phenomenon, as the sharing economy is here to stay ­– and has much to offer.

Read the article by Johanna Mair and Georg Reischauer here.

A video overview of the paper can be found here.

Further research explored by Mair and Reischauer on this topic can be found on the research project page, i-share: The sharing economy's impact in Germany, which is funded by the German Federal Ministry of Education and Research.

More about the authors