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Compensating differentials and unmeasured ability in the labor market for nurses: Why do hospitals pay more?

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Author Info
Edward J. Schumacher
Barry T. Hirsch

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Abstract

Registered nurses (RNs) employed in hospitals realize a large wage advantage relative to RNs employed elsewhere. Cross-sectional estimates indicate a hospital RN wage advantage of roughly 20%. This paper examines possible sources of the hospital premium, a topic of some interest given the current shifting of medical care out of hospitals. Longitudinal analysis of Current Population Survey data for 1979-94 suggests that a third to a half of the advantage is due to unmeasured worker ability, and the authors conclude that the remainder of the advantage probably reflects compensating differentials for hospital disamenities. Supporting these conclusions is evidence that hospital RNs have higher cognitive ability and higher-quality job experience than non-hospital RNs, and indications that shift work accounts for roughly 10% of the hospital premium. (Abstract courtesy JSTOR.)

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Publisher Info
Article provided by ILR Review, ILR School, Cornell University in its journal ILR Review.

Volume (Year): 50 (1997)
Issue (Month): 4 (July)
Pages: 557-579
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Handle: RePEc:ilr:articl:v:50:y:1997:i:4:p:557-579

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-81, September. [Downloadable!] (restricted)
  2. Hirsch, B.T. & Scumacher, E.J., 1996. "Union Wages, Rents, and Skills in Health Care Labor Markets," Working Papers 1996_03_02, Department of Economics, Florida State University.
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  3. Hwang, Hae-shin & Reed, W Robert & Hubbard, Carlton, 1992. "Compensating Wage Differentials and Unobserved Productivity," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 835-58, August. [Downloadable!] (restricted)
  4. Adamache, Killard W. & Sloan, Frank A., 1982. "Unions and hospitals : Some unresolved issues," Journal of Health Economics, Elsevier, vol. 1(1), pages 81-108, May. [Downloadable!] (restricted)
  5. Gibbons, Robert & Katz, Lawrence F, 1992. "Does Unmeasured Ability Explain Inter-industry Wage Differentials?," Review of Economic Studies, Blackwell Publishing, vol. 59(3), pages 515-35, July. [Downloadable!] (restricted)
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  6. DuMond J.M. & Hisch, B.T. & Macpherson, D.A., 1996. "Wage Differentials Across Labor Markets and Workers: Does Cost of Living Matter?," Working Papers 1996_08_01, Department of Economics, Florida State University.
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  7. Erica L. Groshen & Alan B. Krueger, 1990. "The structure of supervision and pay in hospitals," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 43(3), pages 134-146, February.
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  8. Roger Feldman & Richard Scheffler, 1982. "The union impact on hospital wages and fringe benefits," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 35(2), pages 196-206, January.
  9. Peracchi, Franco & Welch, Finis, 1995. "How representative are matched cross-sections? Evidence from the Current Population Survey," Journal of Econometrics, Elsevier, vol. 68(1), pages 153-179, July. [Downloadable!] (restricted)
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  10. Macpherson, David A & Hirsch, Barry T, 1995. "Wages and Gender Composition: Why Do Women's Jobs Pay Less?," Journal of Labor Economics, University of Chicago Press, vol. 13(3), pages 426-71, July. [Downloadable!] (restricted)
  11. Hirsch, Barry T. & Schumacher, Edward J., 1995. "Monopsony power and relative wages in the labor market for nurses," Journal of Health Economics, Elsevier, vol. 14(4), pages 443-476, October. [Downloadable!] (restricted)
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  12. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Jakubson, George, 1991. "Estimation and Testing of the Union Wage Effect Using Panel Data," Review of Economic Studies, Blackwell Publishing, vol. 58(5), pages 971-91, October. [Downloadable!] (restricted)
  14. Kostiuk, Peter F, 1990. "Compensating Differentials for Shift Work," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1054-75, October. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Lanfranchi, Joseph & Ohlsson, Henry & Skalli, Ali, 2001. "COMPENSATING WAGE DIFFERENTIALS AND SHIFT WORK PREFERENCES. Evidence from France," Working Papers in Economics 55, Göteborg University, Department of Economics. [Downloadable!]
  2. Sæther, Erik Magnus, 2009. "Nurses’ labor supply with endogenous choice of care level and shift type A nested discrete choice model with nonlinear income," HERO On line Working Paper Series 2004:9, Oslo University, Health Economics Research Programme. [Downloadable!]
  3. Barry T. Hirsch & Edward J. Schumacher, . "Union Wages, Rents, and Skills in Health Care Labor Markets," Working Papers 9721, East Carolina University, Department of Economics. [Downloadable!]
    Other versions:
  4. James Peoples & Bin Wang, 2007. "Privatization and Labor Cost Savings: Evidence from Health Care Services," Atlantic Economic Journal, International Atlantic Economic Society, vol. 35(2), pages 145-157, June. [Downloadable!] (restricted)
  5. Janet Currie & Mehdi Farsi & Bentley MacLeod, 2004. "Cut to the Bone? Hospital Takeovers and Nurse Employment Contracts," Working Papers 864, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
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  6. Daniel S. Hamermesh, 1998. "Crime and the Timing of Work," NBER Working Papers 6613, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Hirsch, Barry & Schumacher, Edward J., 2008. "Underpaid or Overpaid? Wage Analysis for Nurses Using Job and Worker Attributes," IZA Discussion Papers 3833, Institute for the Study of Labor (IZA). [Downloadable!]
  8. Kathryn E. Yaeger, 1977. "Modal Choice in the Demand for Child Care by Working Women," Working Papers 485, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
  9. Edward J. Schumacher, . "Relative Wages and the Returns to Education in the Labor Market for Registered Nurses," Working Papers 9720, East Carolina University, Department of Economics. [Downloadable!]
  10. Edward J. Schumacher, . "The Earnings and Employment of Nurses: Evidence from the 1990s," Working Papers 9803, East Carolina University, Department of Economics. [Downloadable!]
  11. Michael J. Dueker & Stephen J. Spurr & Ada K. Jacox & David E. Kalist, 2005. "The practice boundaries of advanced practice nurses: an economic and legal analysis," Working Papers 2005-071, Federal Reserve Bank of St. Louis. [Downloadable!]
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  12. Edward J. Schumacher, 1999. ""The Earnings and Employment of Nurses in an Era of Cost Containment," Working Papers 9910, East Carolina University, Department of Economics. [Downloadable!]
  13. Daniel S. Hamermesh, 1998. "Changing Inequality in Markets for Workplace Amenities," NBER Working Papers 6515, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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