The effect of peer-to-peer (P2P) accommodations on the local economy: evidence from Madrid

Abstract

This paper investigates the effect of P2P accommodations on the local economy of the city of Madrid. We find that the arrival of Airbnb has fostered food and beverage services. We exploit the exogenous variation created by the timing and the unequal distribution of Airbnb listings across the urban geography to identify its effects on the number and employment of food and beverage services. Using an instrumental variable strategy, we find positive effects on both the number of restaurants and their employees: an increase in ten Airbnb rooms in a given census tract translates to one more restaurant, and the same increase in a given neighbourhood generates nine new tourist-related employees. The results are robust to sample composition, spatial spillovers and alternative measures of tourist-related activities. This paper contributes to the literature on the economic impacts of the platform economy on urban areas by providing evidence of positive economic externalities from P2P accommodations.