Is the sharing economy causing a regime switch in consumption?

Abstract

The recent rise of digital technology has enabled the development of various online platforms that gave rise to the so-called sharing economy. Academics suggest that this economy is causing a switch in consumer behaviour. This paper attempts to test this hypothesis by fitting a smooth transition autoregressive model to the cycle of the proportion of e-commerce to personal consumption in the U.S. between 1999 and 2019. The analysis reveals that the sharing economy, driven by the diffusion of digital technology, is causing consumption to transition smoothly, but frequently, between two regimes between 1999 and 2013. In the later period, however, it displays a stable regime due to the slow diffusion of digital technologies over this period. We conclude that, indeed, the sharing economy is causing a regime switch in consumption, and the dynamic behaviour of this regime switching is consistent with the behaviour of the diffusion process of digital technologies.

Keywords

• sharing economy
• digital technology
• technological diffusion
• regime switching models
• smooth transition regression