Can pay regulation kill? Panel data evidence on the effect of labor markets on hospital performance

Emma Hall, Carol Propper and John van Reenen

The Centre for Market and Public Organisation from The Centre for Market and Public Organisation, University of Bristol, UK

Abstract: Labor market regulation can have harmful unintended consequences. In many markets, especially for public sector workers, pay is regulated to be the same for individuals across heterogeneous geographical labor markets. We would predict that this will mean labor supply problems and potential falls in the quality of service provision in areas with stronger labor markets. In this paper we exploit panel data from the population of English acute hospitals where pay for medical staff is almost flat across the country. We predict that areas with higher outside wages should suffer from problems of recruiting, retaining and motivating high quality workers and this should harm hospital performance. We construct hospital-level panel data on both quality - as measured by death rates (within hospital deaths within thirty days of emergency admission for acute myocardial infarction, AMI) - and productivity. We present evidence that stronger local labor markets significantly worsen hospital outcomes in terms of quality and productivity. A 10% increase in the outside wage is associated with a 4% to 8% increase in AMI death rates. We find that an important part of this effect operates through hospitals in high outside wage areas having to rely more on temporary “agency staff” as they are unable to increase (regulated) wages in order to attract permanent employees. By contrast, we find no systematic role for an effect of outside wages of performance when we run placebo experiments in 42 other service sectors (including nursing homes) where pay is unregulated.

Keywords: labor market regulation; hospital quality; hospital productivity; skills. (search for similar items in EconPapers)
JEL-codes: F12 I18 J31 J45 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2007-12
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.bristol.ac.uk/cmpo/publications/papers/2008/wp184.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.bristol.ac.uk/cmpo/publications/papers/2008/wp184.pdf [302 Moved Temporarily]--> https://www.bristol.ac.uk/cmpo/publications/papers/2008/wp184.pdf)

Related works:
Journal Article: Can Pay Regulation Kill? Panel Data Evidence on the Effect of Labor Markets on Hospital Performance (2010)
Working Paper: Can Pay Regulation Kill? Panel Data Evidence on the Effect of Labor Markets on Hospital Performance (2008)
Working Paper: Can Pay Regulation Kill? Panel Data Evidence on the Effect of Labour Markets on Hospital Performance (2008)
Working Paper: Can pay regulation kill? Panel data evidence on the effect of labor markets on hospital performance (2008)
Working Paper: Can pay regulation kill? Panel data evidence on the effect of labor markets on hospital performance (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bri:cmpowp:08/184

Access Statistics for this paper

More papers in The Centre for Market and Public Organisation from The Centre for Market and Public Organisation, University of Bristol, UK Contact information at EDIRC.
Bibliographic data for series maintained by ().