Abstract
We study how the gig economy affects new business formation. Using the staggered entry of ridehailing (Uber and Lyft) across U.S. locations from 2000 to 2016, we ask whether access to gig work—a fallback source of income—changes how often people start businesses.
Ridehailing entry raises new business registrations by about 5% (4–6%), with matching increases in small-business lending (about 5%) and in entrepreneurship-related search activity (about 7%). The effect is larger where ex-ante economic uncertainty is higher: a one-standard-deviation increase in local wage-growth volatility adds about 3 percentage points. The pattern is consistent with gig work insuring the downside of starting a business.
Key Findings
Gig Work Spurs Entry
Ridehailing entry raises new business registrations by about 5% (4–6%), consistent with gig income serving as a financial parachute for would-be founders.
Insurance Against Uncertainty
The effect is larger where ex-ante economic uncertainty is higher—about 3 percentage points more per standard deviation of local wage-growth volatility.
Corroborating Margins
Small-business lending rises about 5% and entrepreneurship-related searches about 7%, tracking the registration effect.
Who Responds
Entry rises most in areas with lower education and a higher Hispanic population share, and is U-shaped in credit constraints.
Figures
Data & Design
We use the staggered entry of ridehailing (Uber and Lyft) across 1,193 adopting cities, out of 2,959 places, from 2000 to 2016. Comparing places before and after entry in a difference-in-differences design, we trace effects on new business registrations, small-business lending, and entrepreneurship-related search activity, and we test whether the response is larger where local wage-growth volatility is higher.