Is the online gig economy beyond national reach? A European analysis

Abstract

With the emergence of the online gig economy, computer-based jobs can be completed by gig workers around the world. This raises the question whether the labour market for online gigs is truly boundless as distance no longer matters. Based on gravity models, we investigate the effect of geographical, institutional and cultural distance on almost 30 000 platform hirings between 26 European countries. While we find that online gig platforms are used to off-shore work from high- to low-wage countries, the online gig economy is not boundless as gig workers are still preferably hired from geographically close economies. A common language furthermore facilitates hirings between countries. Interestingly, though, differences in formal and informal institutions hardly affect hiring patterns across countries, suggesting that online platforms create their own institutional framework. We conclude that the online gig economy constitutes neither a boundless nor a frictionless labour market, implying that its promise of creating equal access to job opportunities is exaggerated.

The institutional environment and gig platform transaction cost solutions

“…van Slageren et al . (2022) denote these as on-site gig platforms and online gig platforms, respectively.…”

“…There are many costs involved in contracting and providing service through a gig platform: defining the task to be contracted, objectively defining what is to be delivered and under what conditions, providing payment, and organizing actions in case of contingencies, all the while curbing opportunistic behaviour and inducing effort. The platform attractiveness is that it provides a good environment in which to transact because it reduces costs, mainly, but not limited to, information disclosure, standardization of procedures, and payment (Horton et al, 2018;Oranburg and Palagashvili, 2021;van Slageren et al, 2022).…”

“…The questions asked of the respondents can be divided into several blocks, including general characteristics of the respondents and their experience of interaction with the gig platform, assessment of the level of different platform services, benefits associated with using the platform, experiences of conflict with the counterparty, and the associated risks for the user. These follow the mapping of possible transaction costs on gig platforms as seen in the previous section and discussed in Horton et al (2018), Oranburg andPalagashvili (2021), andvan Slageren et al (2022).…”

“…Multi-sided platforms, including labour platforms, reduce transaction costs for their users. Platforms address these issues thanks to network effects as well as specialized tools including algorithmic search, rating systems, and standardization of procedures (Evans and Schmalensee, 2017;Horton et al, 2018;Lobel, 2018;Oranburg and Palagashvili, 2021;van Slageren et al, 2022). The possibility of lowering the monitoring and measurement costs of the platforms, for example, should affect the platform strategy, services provided, and associated transaction costs (Cuypers et al, 2021).…”

National Institutions and Platform Evolution in the European Gig Economy

“…Gig workers often find themselves excluded from access to traditional labour rights, which are linked to employment. In the online gig economy, where platforms facilitate crossnational transactions between gig workers and requesters, national institutions lack the ability to effectively enforce regulations on employment (van Slageren, 2023). This is different for the onsite gig economy as gig requesters and workers here interact directly, in the physical space, when the latter provides services to the former.…”