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Cut to the Bone? Hospital Takeovers and Nurse Employment Contracts

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  • Janet Currie
  • Mehdi Farsi
  • W. Bentley MacLeod

Abstract

This paper uses data from the 1990s to examine changes in the wages, employment, and effort of nurses in California hospitals following takeovers by large chains. The market for nurses has been described as a classic monopsony, so that one might expect increases in firm market power to be associated with declines in wages. However, we show that if one extends the monopsony model to consider effort, or if we apply a basic contracting model to the data, then we would expect to see effects on effort rather than on wages. This prediction is bourne out by the data nurses see few declines in wages following takeovers, but see increases in the number of patients per nurse, our measure of effort. We also find that these changes are similar in the largest for-profit and non-profit chains, suggesting that market forces are more more important than institutional form.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9428.

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Date of creation: Jan 2003
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Publication status: published as Janet Currie, Mehdi Farsi and W. Bentley Macleod. "Cut to the Bone? Hospital Takeovers and Nurse Employment Contracts". Industrial and Labor Relations Review, Vol. 58, No. 3, Festschrift in Honor of Orley Ashenfelter (Apr., 2005), pp. 471-493
Handle: RePEc:nbr:nberwo:9428

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  1. Orley Ashenfelter & James N. Brown, 1985. "Testing the Efficiency of Employment Contracts," Working Papers 573, Princeton University, Department of Economics, Industrial Relations Section..
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  4. Hirsch, B.T. & Schumacher, E.J., 1993. "Monopsony Power and Relative Wages in the Labor Market for Nurses," Working Papers 1993_06_03, Department of Economics, Florida State University.
  5. Martin Gaynor & William B. Vogt, 1999. "Antitrust and Competition in Health Care Markets," NBER Working Papers 7112, National Bureau of Economic Research, Inc.
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  8. Oliver E. Williamson & Michael L. Wachter & Jeffrey E. Harris, 1975. "Understanding the Employment Relation: The Analysis of Idiosyncratic Exchange," Bell Journal of Economics, The RAND Corporation, vol. 6(1), pages 250-278, Spring.
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  17. Ashenfelter, Orley C, 1978. "Estimating the Effect of Training Programs on Earnings," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 47-57, February.
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  22. Sloan Frank A., 2002. "Hospital Ownership Conversions: Defining the Appropriate Public Oversight Role," Forum for Health Economics & Policy, De Gruyter, vol. 5(1), pages 1-46, January.
  23. Janet Currie & John Fahr, 2001. "Hospitals, Managed Care, and the Charity Caseload in California," NBER Working Papers 8621, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Hirsch, Barry & Schumacher, Edward J., 2004. "Classic Monopsony or New Monopsony? Searching for Evidence in Nursing Labor Markets," IZA Discussion Papers 1154, Institute for the Study of Labor (IZA).
  2. 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).
  3. Mehdi Farsi & Geert Ridder, 2006. "Estimating the Out-of-Hospital Mortality Rate Using Patient Discharge Data," IEPR Working Papers 06.45, Institute of Economic Policy Research (IEPR).
  4. Hirsch, Barry T. & Schumacher, Edward J., 2005. "Classic or new monopsony? Searching for evidence in nursing labor markets," Journal of Health Economics, Elsevier, vol. 24(5), pages 969-989, September.
  5. João Ejarque, 2004. "Neoclassical Investment with Moral Hazard," Working Papers w200417, Banco de Portugal, Economics and Research Department.
  6. John P. Burkett, 2005. "The Labor Supply of Nurses and Nursing Assistants in the United States," Eastern Economic Journal, Eastern Economic Association, vol. 31(4), pages 585-599, Fall.
  7. Yong Suk Lee & Andrew D. Foster, 2013. "Staffing Subsidies and the Quality of Care in Nursing Homes," Department of Economics Working Papers 2013-16, Department of Economics, Williams College.

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