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Moral Hazards and Effects of IT-enabled Monitoring Systems in Online Labor Markets

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Title:Moral Hazards and Effects of IT-enabled Monitoring Systems in Online Labor Markets
Authors:Liang, Chen
Hong, Yili
Gu, Bin
Keywords:moral hazard
monitoring systems
online labor market
reputation systems
contract type
Date Issued:04 Jan 2017
Abstract:This paper investigates how IT-enabled monitoring systems mitigate moral hazard in an online labor market and their effect on market competition. We exploit a quasi-experiment at Freelancer when it introduced an IT-enabled monitoring system in 2015. We use a difference-in-differences (DID) approach to identify the treatment effect of the monitoring system on employer contractor choice, market competition, and employer surplus. We found that the IT-enabled monitoring system lowers the employers’ willingness to pay the reputation premiums. Meanwhile, comparing the trend of the control group, the IT-enabled monitoring system raised the employer surplus in hourly projects and increased the number of bids. Our result suggests that IT-enabled monitoring systems have a significant effect on alleviating moral hazards, reducing agency costs, and facilitating market competition.
Pages/Duration:10 pages
Rights:Attribution-NonCommercial-NoDerivatives 4.0 International
Appears in Collections: Access (or Sharing) Economy Minitrack

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