Abstract:
We examine how geography shapes workers' pay rates in the global platform economy, using transaction data from a major online labour platform and quotes from interviews to motivate and illustrate the quantitative analyses. Approximately 35 percent of variation in workers' pay rates is attributable to differences between their home countries, with workers from richer countries earning more. Our exploratory analyses suggest that this is not because of country differences in worker competence, but because workers from lower-income countries have fewer local labour market opportunities and are therefore willing to accept lower-paid gigs online. We also find that clients' perceptions of workers' home countries can explain a significant part of the variation in pay rates, though we do not rule out alternative explanations. We draw comparisons to disadvantages faced by emerging-economy firms seeking to break into international markets, and to immigrants entering host country labour markets, and discuss implications to development policy and platform design.
