The Value of Employer Reputation in the Absence of Contract Enforcement: A Randomized Experiment

In two experiments, we examine the effects of employer reputation in Amazon Mechanical Turk, an online labor market in which employers may decline to pay workers while keeping the work product. In the first experiment, a research assistant who is blinded to reputation performs tasks posted by employers with good, bad, or no online reputations. Results confirm the value of reputation; due to shorter tasks and rarer nonpayment, effective wages among good reputation employers are about 40 percent greater than those for neutralor bad-reputation employers. In the second experiment, we create multiple employer identities endowed with different exogenously introduced reputations. We find that employers with good reputations attract workers at nearly twice the rate as those with bad reputations with no discernible difference in quality. We interpret these results through the lens of an equilibrium search model in which the threat of a bad reputation deters employers from the abuse of authority even in the absence of contractual protections of workers. The results demonstrate the value of employer reputation systems for workers and employers, and thus for labor market efficiency.