Driving Innovation: Timbro Index Charts Scope of Global Sharing Economy

The Swedish think tank Timbro has published the first global index of the sharing economy. The Timbro Sharing Economy Index (TSEI) is the first study to compare the impact of the sharing economy between nations. It does so by providing a new definition of the sharing economy that incorporates:

• The use of excess capacity (e.g., labor, spare rooms, unused cars used to provide income)
• Large decentralized digital networks as coordinators, matching supply and demand
• Trust between strangers facilitated by infrastructure (the report describes this as “private trust is externalized and turned into a public resource for the crowd”)

These factors come together to create an economy that is characterized by:

• Microtransactions (transactions are individual—and may not be monetary)
• Ad hoc matchmaking (supply and demand is matched on-demand, between peers)
• Decentralized supply (supply comes from peers who contribute their excess capacity on a case-by-case basis)

A detailed process of data-gathering followed, involving web-scraping in many languages, checks to ensure that service providers were not bound by contractual or employment relationships, and whether or not the service was based on inputs (which the study requires based on its presumption of excess capacity).

The resulting data set offers the world previously unconsidered insight into the global sharing economy. With the rapid global growth of the sharing economy coupled with increased government determination to regulate the market, this new data will help regulators and entrepreneurs respond effectively to the shifting economy and understand the benefits associated with a flourishing sharing market.

Among the threats to the sharing economy are some common misconceptions about the nature of the market that the new data provided by Timbro refute.

For instance, many believe that high levels of social trust are a precondition to maintaining an effective sharing economy. By controlling their international data sample for certain variables, Timbro found that social trust is unrelated to the use of sharing economy services. This suggests that introducing sharing economy services to a nation contributes to an increase in social trust there.

Critics have also claimed that the sharing economy has developed simply as a way for businesses to avoid taxation and regulation. If this were true, one might expect the data to show a correlation between high regulatory environments and expansive sharing networks. Instead, TSEI shows a negative correlation between the two. Furthermore, sharing networks tend to thrive in nations with greater economic freedom. According to the report, the sharing economy is “basically a new and innovative way of doing business” rather than an end-around run around excessive regulation. This suggests that regulators should be less skeptical about the emergence of a sharing economy innovation in an area they regulate.

The Timbro index is a great step forward in understanding the global economy in the 21^st Century. The insight it provides through its new data will allow governments to understand what constitutes a healthy environment for new business and inspire innovators to create value for the international consumer. The benefits to any society of the sharing economy unveiled by TSEI’s data should incentivize nations around the world to streamline the path to success for sharing companies by treating it as the innovation it is rather than a variant on old ways.

Research Associate Timothy Green contributed to this blog post.