THREE ESSAYS ON ONLINE LABOR MARKETS FOR IT SERVICES

Abstract

Ubiquitous access to the Internet and supporting technologies gave birth to online labor markets (Malone and Laubacher 1998). Online labor markets enable employers (employers) to contract with professionals (service providers) from anywhere in the world. Firms now are able to greatly expand their workforce and bring a large arsenal of labor to bear on IT jobs, such as software or web development using Internet-enabled procurement platforms such as Freelancer. These markets serve as intermediaries for IT services (outsourcers post Call for Bids (CFBs) for services and providers offer bids for IT services) that help match employers with service providers across the globe. In my dissertation, I try to comprehensively study this Internet-enabled phenomenon from the perspectives of these three entities on global online markets with three separate yet related essays. The first essay focuses on the "global" nature of the market, and assess the effect of global frictions and global labor arbitrage on both provider bidding and employer selection. The second essay focuses on the effect of auction mechanism - sealed versus open bid auction - on providers' bidding dynamics, and the market performance. The third essay focuses on estimating true consumer (employer) surplus of online labor markets with a quality-adjusted measure. I also test its robustness by comparing its effects on consumers' subsequent transactions. I also find that market immaturity, consumers' lack of experience in the market, and consumers' lack of familiarity with IT service providers lead to the difference between the traditional measure and the quality-adjusted consumer surplus.