Are Global Labor Markets Truly “Flat”? Global Frictions, Labor Arbitrage, and Reputation Signals in Online Markets

ثبت نشده
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.

برای دانلود رایگان متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید

ثبت نام

اگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید

منابع مشابه

Determinants of Matching in Online Labor Markets: A Structural Two-Sided Matching Model

In the past decade, IT has facilitated the shift from permanent employment to need-based outsourcing and from local labor market to global online labor markets. While prior studies have examined how global frictions affect employers’ hiring decisions on online labor markets, we have limited understanding of the inter-dependence between workers and employers and the economic impact of IT-enabled...

متن کامل

Volatility Spillover of the Exchange Rate and the Global Economy on Iran Stock Market

Financial markets are one of the most fundamental markets in any country. In the financial markets, the securities market and the foreign exchange market are sensitive sectors. These two markets are affected by fluctuations and economic cycles so reflect economic changes rapidly. Changes in the returns of one market due to arbitrage conditions during time lead to changes in the returns of other...

متن کامل

Online Labor Markets

In recent years, a number of online labor markets have emerged that allow workers from around the world to sell their labor to an equally global pool of buyers. The creators of these markets play the role of labor market intermediary by providing institutional support and remedying informational asymmetries. In this paper, I explore market creators’ choices of price structure, price level and i...

متن کامل

Aggregate implications of indivisible labor, incomplete markets, and labor market frictions

This paper analyzes a model that features frictions, an operative labor supply margin, and incomplete markets. We first provide analytic solutions to a benchmark model that includes indivisible labor and incomplete markets in the absence of trading frictions. We show that the steady state levels of aggregate hours and aggregate capital stock are identical to those obtained in the economy with e...

متن کامل

Interaction of Labor and Credit Market Frictions: A Theoretical and Empirical Analysis

In this paper we investigate macroeconomic dynamics in the presence of frictions in both labor and credit markets. On the basis of the macroeconomic model in Merz (1995) with labor market frictions and capital accumulation, our paper offers an extension to frictions in credit markets which, analogously, are modeled as a search-and-matching process. Using the Merz model as limit case, we conside...

متن کامل

ذخیره در منابع من


  با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید

عنوان ژورنال:

دوره   شماره 

صفحات  -

تاریخ انتشار 2013