Venue: The Fuqua School of Business, Duke University, 1 Towerview Drive, Durham, NC 27708-0120

 

Presentation

Monopsony in the Labor Market for Nurses

Authors:

Presenter: Jordan Matsudaira (Cornell University)

Discussant: Edward Schumacher (Trinity University)

Session: Public Policies, Quasi-Experiments, and Health

Room: Classroom E

When: Monday 1 p.m. - 2:30 p.m.

One explanation that has been offered for a perceived shortage of nurses in the United States appeals to the notion that employers exercise monopsony power keeping both wages and employment low. While this theory is by no means new, very little credible research exists evaluating this basic feature of the nursing labor market. The chief impediment to progress in this area has been the difficulty in finding firm level instruments for labor demand in order to estimate the elasticity of labor supply to individual firms. In this paper, I argue that minimum staffing legislation for nursing homes and hospitals provide a way to surmount this key identification challenge. Changes in minimum staffing legislation over the 1990s and early 2000s served as a shock to the labor demand of hospitals and nursing homes with staffing levels that fell below the new legislated thresholds, but may not have affected firms with initially high levels of staff. Using detailed panel data on the wages and hours worked of nurses in nursing homes and hospitals in California, I use this natural experiment to estimate the elasticity of labor supply. I estimate results separately for different types of nursing labor, and compare the patterns of results with the predictions from monopsony models.