“Not a Lot of People Know Where It Is”: Liabilities of Origin in Online Contract Work

Apart from conventional outsourcing and offshoring between firms, work is now also sourced from individuals working as online contractors through platforms such as Odesk. We examine what implications this new form of organizing has to the nature of the work, focusing on how online contractors’ geographic origin influences their labour market outcomes. Online contracting could potentially greatly increase the earnings of sufficiently skilled workers in low-income countries. We document that this not necessarily the case. Analysing transaction records from Odesk, a leading platform for online contract work, we suggest and empirically test for the presence of three mechanisms which depress developing countries’ online contractors’ wages. These are statistical discrimination, taste based discrimination, and lower reservation wages compared to contractors from developed countries. We discuss our findings in the context of “liabilities of origin”