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Monopsony in Professional Labor Markets: Hospital System Concentration and Nurse Wages

Author

Listed:
  • Sylvia A. Allegretto

    (Center for Economic and Policy Research)

  • Dave Graham-Squire

    (University of California San Francisco)

Abstract

Rolling waves of consolidation have significantly decreased the number of hospital systems in the U.S. potentially affecting industry quality, prices, efficiency, wages and more. This research concerns the growth in hospital system consolidation in local labor markets and its effect on registered nurse wages. We first use a nonparametric preprocessing data step via matching methods to define MSA-specific samples of workers analogous to nurses outside of the hospital sector. This step enables an accounting of heterogeneous MSA-specific baseline wage growth, and yields a standardized measure of nurse wage growth across MSAs used to set up a multi-site quasi-experiment. We then run a parsimonious linear model; market size matters, for every 0.1 increase in consolidation in smaller-MSAs, real hourly nurse wage growth decreased by $0.70 (p-value of 0.038). Though not the primary aim of this study, a secondary finding is that real hourly wages for nurses grew less than that of comparable workers by $4.08.

Suggested Citation

  • Sylvia A. Allegretto & Dave Graham-Squire, 2023. "Monopsony in Professional Labor Markets: Hospital System Concentration and Nurse Wages," Working Papers Series inetwp197, Institute for New Economic Thinking.
    • Handle: RePEc:thk:wpaper:inetwp197
    DOI: 10.36687/inetwp197
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    File URL: https://doi.org/10.36687/inetwp197
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    References listed on IDEAS

    as
    1. Sylvia Allegretto & Arindrajit Dube & Michael Reich & Ben Zipperer, 2017. "Credible Research Designs for Minimum Wage Studies," ILR Review, Cornell University, ILR School, vol. 70(3), pages 559-592, May.
    2. 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.
    3. Anna Sokolova & Todd Sorensen, 2021. "Monopsony in Labor Markets: A Meta-Analysis," ILR Review, Cornell University, ILR School, vol. 74(1), pages 27-55, January.
    4. Martin Gaynor & Kate Ho & Robert J. Town, 2015. "The Industrial Organization of Health-Care Markets," Journal of Economic Literature, American Economic Association, vol. 53(2), pages 235-284, June.
    5. Elena Prager & Matt Schmitt, 2021. "Employer Consolidation and Wages: Evidence from Hospitals," American Economic Review, American Economic Association, vol. 111(2), pages 397-427, February.
    6. Alexis Diamond & Jasjeet S. Sekhon, 2013. "Genetic Matching for Estimating Causal Effects: A General Multivariate Matching Method for Achieving Balance in Observational Studies," The Review of Economics and Statistics, MIT Press, vol. 95(3), pages 932-945, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    monopsony; hospital consolidation; imperfect competition; matching methods for data preprocessing.;
    All these keywords.

    JEL classification:

    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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