Missing trade in tasks: Employer outsourcing in the gig economy
Only a small share of employers in high-wage locations procure services from abroad. We document heterogeneous employer adoption of an online labor market that facilitates trade in tasks with global workers. Job vacancies posted by experienced employers who have adopted the market are twice as likely to be filled, and this difference is unrelated to the set of available job applicants or their wages. Instead, hiring demand from experienced employers shifts outward for two reasons that we identify using exogenous variation in workers’ wage bids. First, their value for hiring in the market increases – a form of learning-by-doing. Second, experienced employers omit the low-value employers who leave the market. Employers appear to learn their value for online hiring only by trying it out, and new employers’ adoption decisions are relatively insensitive to wage rates. Larger firms have lower estimated values for the market. The results suggest that employers’ willingness to fragment and outsource production at the task level, rather than the quality of the available online workforce, limits the growth of the gig economy.