Role of Monetary Incentives in the Digital and Physical Inter-Border Labor Flows

Journal of Management Information Systems, Forthcoming

Fox School of Business Research Paper No. 18-021

42 Pages Posted: 2 Jun 2018 Last revised: 15 Aug 2018

See all articles by Jing Gong

Jing Gong

Temple University - Department of Management Information Systems

Yili Hong

Arizona State University (ASU) - W.P. Carey School of Business

Alejandro Zentner

University of Texas at Dallas - Naveen Jindal School of Management

Date Written: April 29, 2018

Abstract

By allowing individuals to engage in remote relationships with foreign employers, online labor markets have the potential to mitigate the inefficiency costs due to the legal barriers and other frictions deterring international physical migration. This study investigates how the supply of foreign labor in digital and physical markets responds differently to monetary incentives. We use a unique data set containing information on digital labor flows from a major global online labor platform in conjunction with data on physical labor flows. We exploit short-term fluctuations in the exchange rate as a source of econometric identification: a depreciation of a country’s currency against the U.S. dollar increases the incentives of its workers to seek digital and physical employment from employers based in the United States. Using a panel count data model, we find that monetary incentives induced by depreciations of foreign currencies against the U.S. dollar are positively associated with the supply of foreign labor in digital markets, as expected from the frictionless nature of electronic markets. However, we fail to find a positive relationship between monetary incentives and the supply of foreign labor in physical markets, which might be expected due to the substantial bureaucratic restrictions and transaction costs associated with physical migration. We further examine how countries’ income and information and communications technologies development levels moderate the positive relationship between monetary incentives and digital labor flows. Our findings are useful for gauging the extent to which digital labor flows can alleviate the economic inefficiencies from the restrictions on physical migration.

Keywords: economics of information systems, electronic markets, empirical research, income elasticity, information policy, monetary incentive theory, online labor markets, outsourcing

Suggested Citation

Gong, Jing and Hong, Yili and Zentner, Alejandro, Role of Monetary Incentives in the Digital and Physical Inter-Border Labor Flows (April 29, 2018). Journal of Management Information Systems, Forthcoming; Fox School of Business Research Paper No. 18-021. Available at SSRN: https://ssrn.com/abstract=3182905

Jing Gong

Temple University - Department of Management Information Systems ( email )

1810 N. 13th Street
Floor 2
Philadelphia, PA 19128
United States

Yili Hong (Contact Author)

Arizona State University (ASU) - W.P. Carey School of Business ( email )

Tempe, AZ 85287-3706
United States

HOME PAGE: http://yilihong.github.io/

Alejandro Zentner

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

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