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Is There Monopsony In The Labor Market? Evidence From A Natural Experiment

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Author Info

  • Douglas Staiger

    (Dartmouth College and NBER)

  • Joanne Spetz

    (Public Policy Institute of California)

  • Ciaran Phibbs

    (Stanford University School of Medicine)

Abstract

A variety of recent theoretical and empirical advances have renewed interest in monopsonistic models of the labor market. However, there is little direct empirical support for these models, even in labor markets that are textbook examples of monopsony. We use an exogenous change in wages at Veterans Affairs hospitals as a natural experiment to investigate the extent of monopsony in the nurse labor market. In contrast to much of the prior literature, we estimate that labor supply to individual hospitals is quite inelastic, with short-run elasticity around 0.1. We also find that non-VA hospitals responded to the VA wage change by changing their own wages.

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Bibliographic Info

Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 1115.

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Date of creation: Dec 2008
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Handle: RePEc:pri:indrel:dsp01cn69m414g

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Keywords: monopsony papers; nurses; hospitals; labor market;

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  1. William M. Boal & Michael R. Ransom, 1997. "Monopsony in the Labor Market," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 86-112, March.
  2. 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.
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