NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Cut to the Bone? Hospital Takeovers and Nurse Employment Contracts

Janet Currie, Mehdi Farsi, W. Bentley MacLeod

NBER Working Paper No. 9428
Issued in January 2003
NBER Program(s):   HC   LS

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.

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Document Object Identifier (DOI): 10.3386/w9428

Published: Janet Currie, Mehdi Farsi and W. Bentley Macleod. "Cut to the Bone? Hospital Takeovers and Nurse Employment Contracts". Industrial and Labor Relations Review, Vol. 58, No. 3, Festschrift in Honor of Orley Ashenfelter (Apr., 2005), pp. 471-493

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