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Can Reputation Discipline the Gig Economy? Experimental Evidence from an Online Labor Market

Author

Listed:
  • Benson, Alan

    (University of Minnesota)

  • Sojourner, Aaron

    (Federal Reserve Bank of Minneapolis)

  • Umyarov, Akhmed

    (University of Minnesota)

Abstract

Just as employers face uncertainty when hiring workers, workers also face uncertainty when accepting employment, and bad employers may opportunistically depart from expectations, norms, and laws. However, prior research in economics and information sciences has focused sharply on the employer’s problem of identifying good workers rather than vice versa. This issue is especially pronounced in markets for gig work, including online labor markets, where platforms are developing strategies to help workers identify good employers. We build a theoretical model for the value of such reputation systems and test its predictions in on Amazon Mechanical Turk, where employers may decline to pay workers while keeping their work product and workers protect themselves using third-party reputation systems, such as Turkopticon. We find that: (1) in an experiment on worker arrival, a good reputation allows employers to operate more quickly and on a larger scale without loss to quality; (2) in an experimental audit of employers, working for good-reputation employers pays 40 percent higher effective wages due to faster completion times and lower likelihoods of rejection; and (3) exploiting reputation system crashes, the reputation system is particularly important to small, good-reputation employers, which rely on the reputation system to compete for workers against more established employers. This is the first clean field evidence of the effects of employer reputation in any labor market and is suggestive of the special role that reputation-diffusing technologies can play in promoting gig work, where conventional labor and contract laws are weak.

Suggested Citation

  • Benson, Alan & Sojourner, Aaron & Umyarov, Akhmed, 2018. "Can Reputation Discipline the Gig Economy? Experimental Evidence from an Online Labor Market," Working Papers 16, Federal Reserve Bank of Minneapolis, Opportunity and Inclusive Growth Institute.
  • Handle: RePEc:fip:fedmoi:0016
    DOI: 10.21034/iwp.16
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Reputation; Labor; Job search; Screening; Contracts; Online ratings; Personnel; Online labor markets;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • M55 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Contracting Devices

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