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The Economic Footprint of Short-Term Rentals on Local Businesses: Evidence from Portugal

Author

Listed:
  • Cruz, Ronize

    (University of Coimbra)

  • Nobre, Francisco

    (Kingston University London)

  • Pereira dos Santos, João

    (ISEG)

Abstract

We analyze how the proliferation of short-term rentals (STRs) affects firm survival, performance, and entry in two European cities with high STR density. Using administrative firm-level accounting data, a shift-share instrument, and an event-study design, we find that STR growth increases exit rates among underperforming firms, while surviving firms experience relative gains in sales and profits, with minimal effects on employment or investment. Operational costs, particularly rents and liabilities, also rise. STR expansion stimulates entrepreneurship, though new entrants face higher costs and lower initial profitability. These findings underscore the nuanced impacts of tourism-driven demand shocks on urban economic ecosystems.

Suggested Citation

  • Cruz, Ronize & Nobre, Francisco & Pereira dos Santos, João, 2025. "The Economic Footprint of Short-Term Rentals on Local Businesses: Evidence from Portugal," IZA Discussion Papers 18295, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18295
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    References listed on IDEAS

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    1. Cody Cook & Rebecca Diamond & Jonathan V Hall & John A List & Paul Oyer, 2021. "The Gender Earnings Gap in the Gig Economy: Evidence from over a Million Rideshare Drivers," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(5), pages 2210-2238.
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    Keywords

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    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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