NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

Douglas Staiger, Joanne Spetz, Ciaran Phibbs

NBER Working Paper No. 7258
Issued in July 1999
NBER Program(s):Health Economics

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.

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Document Object Identifier (DOI): 10.3386/w7258

Published: Douglas O. Staiger & Joanne Spetz & Ciaran S. Phibbs, 2010. "Is There Monopsony in the Labor Market? Evidence from a Natural Experiment," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 211-236, 04. citation courtesy of

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