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

Doug Staiger, Joanne Spetz and Ciaran Phibbs
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Joanne Spetz: Public Policy Institute of California
Ciaran Phibbs: Stanford University School of Medicine

No 1115, Working Papers from Princeton University, Department of Economics, Industrial Relations Section.

Abstract: A variety of 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, even in labor markets that are textbook examples of monopsony. We use an exogenous change in wages at Veterans Affairs hospitals as a natural experiment to investigate the extent of monopsony in the nurse labor market. In contrast to much of the prior literature, 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.

Keywords: monopsony papers; nurses; hospitals; labor market (search for similar items in EconPapers)
JEL-codes: I11 J42 L13 (search for similar items in EconPapers)
Date: 2008-12
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Related works:
Journal Article: Is There Monopsony in the Labor Market? Evidence from a Natural Experiment (2010)
Working Paper: Is There Monopsony in the Labor Market? Evidence from a Natural Experiment (1999)
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