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 globalization on matching outcomes such as the number of matched projects, freelancer wages, and project values generated from matching. This study is an attempt to fill in the gap by examining the dual roles of IT-enabled globalization, i.e., (1) in determining the formation of matches between employers and freelancers, and (2) in affecting market outcomes. From a market perspective, we take into account two-sided decision making, competition on each side, complementarities between employer and freelancer attributes, and endogenous money transfers between employers and