The Effect of Short-Term Rentals on Local Consumption Amenities: Evidence from Madrid

Hidalgo, Alberto and Riccaboni, Massimo and Velázquez, Francisco J. The Effect of Short-Term Rentals on Local Consumption Amenities: Evidence from Madrid. EIC working paper series #1/2022

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Abstract

This paper investigates the impact of the arrival of Airbnb on the local consumption amenities in Madrid. 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 food and beverage establishments. Using an instrumental variable strategy, we find positive local effects on both the number of restaurants and their employees: an increase in ten Airbnb rooms in a given census tract translates into one more restaurant, and the same increase in a given neighborhood generates nine new tourist-related employees. The results are robust to sample composition, spatial spillovers and alternative measures of local consumption amenities. 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 short-term rentals.

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