EconPapers    
Economics at your fingertips  
 

Factor Substitution and Unobserved Factor Quality in Nursing Homes

John Cawley (), David C. Grabowski and Richard A. Hirth

No 10465, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper studies factor substitution in one important sector: the nursing home industry. Specifically, we measure the extent to which nursing homes substitute materials for labor when labor becomes relatively more expensive. From a policy perspective, factor substitution in this market is important because materials-intensive methods of care are associated with greater risks of morbidity and mortality among nursing home residents. Studying longitudinal data from 1991-1998 on nearly every nursing home in the United States, we use the method of instrumental variables (IV) to address the potential endogeneity of nursing home wages. The results from the IV models are consistent with the theory of factor substitution: higher nursing home wages are associated with lower staffing, greater use of materials (specifically, physical restraints), and a higher proportion of residents with pressure ulcers. A comparison of OLS and IV results suggests that empirical studies of factor substitution should take into account unobserved heterogeneity in factor quality.

JEL-codes: I12 L1 (search for similar items in EconPapers)
Date: 2004-05
New Economics Papers: this item is included in nep-hea
Note: HE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Published as Cawley, John, David Grabowski, and Richard Hirth. "Factor Substitution in Nursing Homes." Journal of Health Economics, March 2006, 25(2): 234-247.

Downloads: (external link)
http://www.nber.org/papers/w10465.pdf (application/pdf)

Related works:
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:nbr:nberwo:10465

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w10465

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2020-05-14
Handle: RePEc:nbr:nberwo:10465