Steering the transition from informal to formal service provision: Labor platforms in emerging-market countries

Abstract

Services that are especially suited to being offered via online labor platforms, such as cleaning, driving and tutoring, are frequently performed in an informal way, especially in emerging-market countries. The informal economy is thus important for recruiting workers for labor platforms. Platform use, however, requires formal service provision, which workers in the informal economy often resist. Thus, labor platforms have to promote workers’ transition from informal to formal service provision. While recent studies have hinted at labor platforms’ fostering of formal economic activity, we know little about how such intermediation unfolds. We use a process lens and comprehensive qualitative data on labor platforms in Panama and Mexico to study how labor platforms steer workers to formal service provision. Detailing the interactive process of workers transitioning to formal service provision as triggered by labor platforms, we add to platform research and literature on intermediation between informal and formal economic activity.