The Value of Employer Reputation in the Absence of Contract Enforcement: A Randomized Experiment

40 Pages Posted: 31 Jan 2015 Last revised: 19 Feb 2017

See all articles by Alan Benson

Alan Benson

University of Minnesota - Twin Cities - Carlson School of Management; Massachusetts Institute of Technology (MIT)

Aaron Sojourner

University of Minnesota; IZA Institute of Labor Economics

Akhmed Umyarov

University of Minnesota - Minneapolis

Date Written: January 10, 2017

Abstract

In three experiments, we examine how an employer reputation system disciplines an online labor market (Amazon Mechanical Turk) in which employers may decline to pay workers while keeping their work product. These three experiments test the value of the employer reputation system for workers, employers, and the market. Specifically, in an experiment that varies reputation, we find that having a good reputation allows employers at twice the rate as bad-reputation employers with no loss in work quality. Second, in audit study of employers by a blinded worker, we find that working only for good employers yields 40\% higher wages. Lastly, exploiting instances that the reputation system servers are down, we find that the reputation system attracts workers to small, good employers that appear to rely on the system to reveal their track record, and apparently away from the largest and best-known among good employers. This is the first clean, field evidence that employer reputation serves as a collateral against opportunism in the absence of contract enforcement.

Keywords: labor market search, employer reputation, incomplete contracts, information asymmetry, online labor market, collective action/public goods

JEL Classification: L14, M55, J2, J41, K12, K42, L86, H41, D82, D89

Suggested Citation

Benson, Alan and Sojourner, Aaron J. and Umyarov, Akhmed, The Value of Employer Reputation in the Absence of Contract Enforcement: A Randomized Experiment (January 10, 2017). Available at SSRN: https://ssrn.com/abstract=2557605 or http://dx.doi.org/10.2139/ssrn.2557605

Alan Benson (Contact Author)

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

HOME PAGE: http://https://sites.google.com/site/amb263/

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

HOME PAGE: http://web.mit.edu/alanmb/www/index.htm

Aaron J. Sojourner

University of Minnesota ( email )

Carlson School of Management
321 19th Ave S, 3-300
Minneapolis, MN 55455
United States
6126249521 (Phone)

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Akhmed Umyarov

University of Minnesota - Minneapolis ( email )

321 19th Ave S
IDSC at Carlson School of Management
Minneapolis, MN 55455
United States

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