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

42 Pages Posted: 30 Apr 2000 Last revised: 25 Feb 2010

See all articles by Douglas Staiger

Douglas Staiger

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

Joanne Spetz

University of California, San Francisco - S/N Community Health Systems; Palo Alto VA Health Care System

Ciaran S. Phibbs

Stanford University - School of Medicine

Date Written: July 1999

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.

Suggested Citation

Staiger, Douglas and Spetz, Joanne E. and Phibbs, Ciaran S., Is There Monopsony in the Labor Market? Evidence from a Natural Experiment (July 1999). NBER Working Paper No. w7258. Available at SSRN: https://ssrn.com/abstract=202434

Douglas Staiger (Contact Author)

Dartmouth College - Department of Economics ( email )

Hanover, NH 03755
United States
603-643-2979 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Joanne E. Spetz

University of California, San Francisco - S/N Community Health Systems ( email )

Third Avenue and Parnassus
San Francisco, CA 94143
United States

Palo Alto VA Health Care System ( email )

Palo Alto, CA 94304
United States

Ciaran S. Phibbs

Stanford University - School of Medicine ( email )

291 Campus Drive
Li Ka Shing Building
Stanford, CA 94305-5101
United States

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