Online Labor Markets: An Informal Freelancer Economy
Hong, Y. and P. A. Pavlou (2013). Online Labor Markets: An Informal Economy. IBIT Report, February 2013
24 Pages Posted: 15 Mar 2013 Last revised: 22 Apr 2014
Date Written: March 1, 2013
In this report, we discuss three aspects of online labor markets. First, we give an overview of the current state of major online marketplaces that offer intermediary services for buyer companies and IT professionals with a focus on one marketplace in particular – Freelancer. Second, we show some findings on the measurable economic benefits online labor markets provide to companies that outsource IT services (measured with consumer surplus) and what factors contribute to higher buyer satisfaction. Third, we offer a novel perspective on the frictions that exist in the micro-level interactions between buyer companies and service providers given the global nature of these markets and how reputation signals can alleviate these frictions. Finally, we offer practical implications and recommendations for companies that use these marketplaces to outsource IT services to professionals across the globe.
Keywords: Online Labor Markets, Freelancer, Software Development
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