The effect of short‐term rentals on local consumption amenities: evidence from Madrid

Abstract

This paper examines the impact of the arrival of Airbnb on local consumption amenities in Madrid. We exploit the exogenous variation created by the timing and uneven distribution of Airbnb listings in the city to determine the impact 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 of 14 Airbnb rooms in a given census tract leads to almost one more restaurant, and the same increase in a given neighborhood generates 11 new tourist‐related employees. The results are robust to the specification and sample composition. This paper contributes to the literature on the economic impact of the platform economy on urban areas by providing evidence of market expansion externalities from short‐term rentals.