The International Price of Remote Work

By: Alberto Cavallo, Javier Cravino, Andres Drenik and Agostina Brinatti

Format:Print
| Language:English

Abstract

We use data from a large web-based job platform to study how the price of remote work is determined in a globalized labor market. In the platform, workers from around the world compete for jobs that can be done remotely. We document that, despite the global nature of the marketplace, the location of the worker accounts for over a third of the variance in wages. The observed wage differences are strongly correlated to the GDP per-capita of the worker’s country. This correlation is not accounted for by differences in workers’ characteristics, occupations, nor for differences in the employers’ locations. We also document that remote wages in local currency move almost one-for-one with the dollar exchange rate of the worker’s country, and are highly sensitive to changes in the wages of foreign competitors. Finally, we provide a new measure on which jobs are easier to offshore that is based on the prevalence of cross-border contracts rather than on subjective job characteristics, and show that there is substantial heterogeneity in the offshorability of remote occupations.

Keywords

Remote Work; Exchange Rates; Purchasing Power Parity; Offshoring And Outsourcing; Macroeconomics; Developing Countries and Economies; Wages; Trade; Globalization; Marketplace Matching; Currency Exchange Rate; Service Industry; Web Services Industry; Technology Industry

Citation

Cavallo, Alberto, Javier Cravino, Andres Drenik, and Agostina Brinatti. "The International Price of Remote Work." NBER Working Paper Series, No. 29437, October 2021.