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

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