Employer Consolidation and Wages: Evidence from Hospitals

Washington Center for Equitable Growth Working Paper

64 Pages Posted: 7 Jun 2019 Last revised: 24 Aug 2020

See all articles by Elena Prager

Elena Prager

Northwestern University

Matthew Schmitt

University of California, Los Angeles (UCLA) - Anderson School of Management

Date Written: May 7, 2019

Abstract

We test whether wage growth slows following employer consolidation by examining hospital mergers. We find evidence of reduced wage growth in cases where both (i) the increase in concentration induced by the merger is large and (ii) workers’ skills are industry-specific. In all other cases, we fail to reject zero wage effects. We consider alternative explanations and find that the observed patterns are unlikely to be explained by merger-related changes besides labor market power. Wage growth slowdowns are attenuated in markets with strong labor unions, and wage growth does not decline after out-of-market mergers that leave local employer concentration unchanged.

JEL Classification: I11, J31, J42

Suggested Citation

Prager, Elena and Schmitt, Matthew, Employer Consolidation and Wages: Evidence from Hospitals (May 7, 2019). Washington Center for Equitable Growth Working Paper, Available at SSRN: https://ssrn.com/abstract=3391889 or http://dx.doi.org/10.2139/ssrn.3391889

Elena Prager (Contact Author)

Northwestern University ( email )

2211 Campus Dr
Evanston, IL 60208
United States

Matthew Schmitt

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

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