Property Rights and Wages: The Case of Nursing Homes
In this paper we develop the implications of the property rights theory of the firm for wage determination and test the model using data from the U.S. nursing home industry. The main theoretical prediction is that any attenuation of property rights will lead to higher wage rates for the firm's employees. The empirical evidence indicates that, indeed, profit-maximizing nursing homes do pay the lowest wage rates (for given quality labor), and that the stronger the cost-minimizing incentives provided by Medicaid reimbursement programs, the lower the wage rate paid by these nursing homes.
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