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Catherine Thomas, LSE Print
Tuesday, 19 February 2019, 14:00 - 15:15

Catherine Thomas, London School of Economics

Experience Markets: An Application to Outsourcing and Hiring

Abstract : In an online labor market for task outsourcing, job vacancies are twice as likely to be filled if the employer has past experience using the market. We show that applicant scarcity does not explain low hiring rates by new employers. Instead, experienced employers' hiring demand is shifted outwards for two reasons that we identify using exogenous variation in wages. First, past hiring increases the value of using the market---a form of learning-by-doing. Second, there is a compositional change from selection in which low value employers leave the market. Employers appear to learn their value for this market only by trying it out. Accounting for employer heterogeneity reveals that new employers' decisions to adopt online hiring are relatively insensitive to the wage levels offered and that subsidizing adoption would be unprofitable for the platform. Larger firms have lower estimated benefits from adoption, suggesting that the growth of the “gig” economy is limited by employers’ willingness to fragment production to the task level. 

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