Effects of IT-Enabled Monitoring Systems in Online Labor Markets

Proceedings of International Conference on Information Systems, Dublin 2016

18 Pages Posted: 28 Sep 2016

See all articles by Chen Liang

Chen Liang

University of Connecticut - School of Business

Yili Hong

University of Miami Herbert Business School

Bin Gu

Boston University - Questrom School of Business

Date Written: 2016

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 enhanced offline tracking features in 2015. Using a large dataset including 17,827 fixed-price projects and 8,563 hourly projects, we use a difference-indifferences (DID) approach to identify the treatment effect of the implementation of IT-enabled monitoring systems on employer contractor choice, employer surplus and market competition. We found that the IT-enabled monitoring system lowers the employers’ preference for high reputable bidders, and thus reduces the reputation premiums. Meanwhile, comparing the trend of fixed-price projects, the implementation of the monitoring systems increased the number of bids by 17.4% and increased employer surplus in hourly projects by 21.5%. Our result suggests that IT-enabled monitoring systems have a significant effect on alleviating moral hazards, reducing agency costs, and facilitating market competition.

Keywords: monitoring systems, moral hazard problems, reputation systems, online labor market, market competition, IT policy and management, contract choice

Suggested Citation

Liang, Chen and Hong, Yili and Gu, Bin, Effects of IT-Enabled Monitoring Systems in Online Labor Markets (2016). Proceedings of International Conference on Information Systems, Dublin 2016, Available at SSRN: https://ssrn.com/abstract=2843944

Chen Liang

University of Connecticut - School of Business ( email )

2100 Hillside Road, Unit 1041
UConn School of Business OPIM
Storrs, CT Connecticut 06269
United States
06269 (Fax)

Yili Hong (Contact Author)

University of Miami Herbert Business School ( email )

P.O. Box 248126
Florida
Coral Gables, FL 33124
United States

Bin Gu

Boston University - Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
157
Abstract Views
869
Rank
314,687
PlumX Metrics