How competitive are online labor markets?

One would expect that online labor markets are competitive. After all, there are many employers and many employees, and most of the labor markets have a high degree of flexibility. Recent papers suggest, however, that employers have substantial market power, even in markets such as Mechanical Turk. This is based on a low labor supply elasticity facing employers (if an employer changes the offered wage, the response in terms of how many people will want to work is relatively small). In a new paper, "What Labor Supply Elasticities do Employers Face? Evidence from Field Experiments," Nail Hassairi and I, show, using experimental data from Mechanical Turk, that this result is likely due to the way prior experiments and research was done. The paper is available here and the abstract is below.

We provide experimental evidence on the labor supply elasticity faced by employers, which is an essential measure of employer market power. We offered two different types of jobs, each with large randomized variations in pay, and observed the amount of work performed. We find no evidence of the strong employer market power suggested by prior research, with our elasticities close to unity. Furthermore, elasticities based on the total amount of work are significantly larger than if we use worker-level data as prior studies have done. Finally, elasticities differ by job type, suggesting that worker characteristics play a crucial role.

Compensating wage differentials in an online labor market

We have recently finished the first in a series of planned papers based on experiments that we ran. The first paper is on the compensating wage differentials theory, with the title "Only if You Pay Me More: Field Experiments Support Compensating Wage Differentials Theory". Abstract below:

Compensating wage differentials is Adam Smith’s idea that wage differences equalize differences in job and worker characteristics. Other than risk of death, however, no job characteristics have consistently been found to affect wages, likely because of problems with self-selection and unobservable job characteristics. We run experiments in an online labor market, randomizing offered pay and job characteristics, thereby overcoming both problems. We find, as predicted by our model, that increasing job disamenities significantly reduces both likelihood of working and amount of work supplied. Correspondingly, the wage increases necessary to compensate workers for worse job disamenities are substantial, supporting the theory.