Diasporas and Outsourcing: Evidence from oDesk and India
AbstractThis study examines the role of the Indian diaspora in the outsourcing of work to India. Our data are taken from oDesk, the world’s largest online platform for outsourced contracts, where India is the largest country in terms of contract volume. We use an ethnic name procedure to identify ethnic Indian users of oDesk in other countries around the world. We find very clear evidence that diaspora-based links matter on oDesk, with ethnic Indians in other countries 32% (9 percentage points) more likely to choose a worker in India. Yet, the size of the Indian diaspora on oDesk and the timing of its effects make clear that the Indian diaspora was not a very important factor in India becoming the leading country on oDesk for fulfilling work. In fact, multiple pieces of evidence suggest that diaspora use of oDesk increases with familiarity of the platform, rather than a scenario where diaspora connections serve to navigate uncertain environments. We further show that diaspora-based contracts mainly serve to lower costs for the company contacts outsourcing the work, as the workers in India are paid about the market wage for their work. These results and other observations lead to the conclusion that diaspora connections continue to be important even as online platforms provide many of the features that diaspora networks historically provided (e.g., information about potential workers, monitoring and reputation foundations).
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Date of creation: Oct 2012
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Other versions of this item:
- Ghani, Ejaz & Kerr, William R. & Stanton, Christopher, 2013. "Diasporas and outsourcing : evidence from oDesk and India," Policy Research Working Paper Series 6403, The World Bank.
- F15 - International Economics - - Trade - - - Economic Integration
- F22 - International Economics - - International Factor Movements and International Business - - - International Migration
- J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, and Immigrants; Non-labor Discrimination
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
- L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
- L84 - Industrial Organization - - Industry Studies: Services - - - Personal, Professional, and Business Services
- M55 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Labor Contracting Devices
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-27 (All new papers)
- NEP-DEV-2012-10-27 (Development)
- NEP-IFN-2012-10-27 (International Finance)
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