Cut to the Bone? Hospital Takeovers and Nurse Employment Contracts

Janet Currie, Mehdi Farsi and W. Bentley Macleod

No 9428, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper uses data from the 1990s to examine changes in the wages, employment, and effort of nurses in California hospitals following takeovers by large chains. The market for nurses has been described as a classic monopsony, so that one might expect increases in firm market power to be associated with declines in wages. However, we show that if one extends the monopsony model to consider effort, or if we apply a basic contracting model to the data, then we would expect to see effects on effort rather than on wages. This prediction is bourne out by the data nurses see few declines in wages following takeovers, but see increases in the number of patients per nurse, our measure of effort. We also find that these changes are similar in the largest for-profit and non-profit chains, suggesting that market forces are more more important than institutional form.

JEL-codes: I11 (search for similar items in EconPapers)
Date: 2003-01
New Economics Papers: this item is included in nep-com and nep-hea
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Citations: View citations in EconPapers (6)

Published as Janet Currie & Mehdi Farsi & W. Bentley Macleod, 2005. "Cut to the bone? Hospital takeovers and nurse employment contracts," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 58(3), pages 494-514, April.

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