Working Paper: NBER ID: w7258
Authors: Douglas Staiger; Joanne Spetz; Ciaran Phibbs
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; labor market; nurses; natural experiment
JEL Codes: J42; I11; L13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| VA wage increase (J38) | increase in wages at nearby non-VA hospitals (J39) |
| VA wage increase (J38) | RN employment at individual hospitals (I11) |
| VA wage increase (J38) | monopsony power in RN labor market (J42) |
| wages at non-VA hospitals responded to the VA wage change (J39) | evidence of monopsony power (J42) |