Are Global Labor Markets Truly “Flat”? Global Frictions, Labor Arbitrage, and Reputation Signals in Online Markets
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چکیده
Visionaries conjecture that the world is becoming a level (“flat”) playing field due to the Internet that connects professional workers with employers anywhere around the world. To examine this “flat world” conjecture for global online labor markets for software development services, we analytically model and empirically examine the key factors that affect the dual aspects pricing of professional service providers and their selection by clients (employers): (1) global frictions, (2) labor arbitrage and (3) reputation signals. We first model and derive the equilibrium pricing strategy of service providers via backward induction of a two-stage game (which includes the client’s selection of a service provider given the provider’s bid price), and we propose a set of hypotheses about the key factors that affect both the providers’ pricing and also their selection by clients. We empirically test our hypotheses with an integrated dataset formed by a random sample (473,970 price bids for 27,450 service projects) from the transaction data from an global online labor marketplace for software development services matched with multiple archival sources (e.g., purchasing power parity (PPP) across countries, language, time-zone, and cultural differences). The results from our econometric analyses show that when submitting their price bids, service providers take into account global frictions (particularly language differences), try to exploit labor arbitrage opportunities with labor low PPP countries, and take advantage of their own reputation signals. In turn, clients avoid global frictions (language, time zone, and cultural differences) and favor providers with strong reputation signals from high PPP countries. Interestingly, online labor markets are not truly level (“flat”) playing fields due to the proposed global frictions that are detrimental to both the service providers’ and clients’ surplus. We discuss theoretical and managerial implications for designing “flatter” global online labor markets.
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تاریخ انتشار 2013