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Is There Monopsony in the Labor Market? Evidence from a Natural Experiment

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  • Douglas O. Staiger
  • Joanne Spetz
  • Ciaran S. Phibbs

Abstract

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. We use an exogenous change in wages at Department of Veterans Affairs (VA) hospitals as a natural experiment to investigate the extent of monopsony in the nurse labor market. 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. (c) 2010 by The University of Chicago. All rights reserved.

Suggested Citation

  • Douglas O. Staiger & Joanne Spetz & Ciaran S. Phibbs, 2010. "Is There Monopsony in the Labor Market? Evidence from a Natural Experiment," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 211-236, April.
  • Handle: RePEc:ucp:jlabec:v:28:y:2010:i:2:p:211-236
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    1. Michael R Ransom & David P. Sims, 2010. "Estimating the Firm's Labor Supply Curve in a "New Monopsony" Framework: Schoolteachers in Missouri," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 331-355, April.
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    More about this item

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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