Cut to the Bone? Hospital Takeovers and Nurse Employment Contracts

36 Pages Posted: 3 Jan 2003 Last revised: 1 Feb 2010

See all articles by Janet Currie

Janet Currie

Princeton University; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

Mehdi Farsi

University of Neuchatel - Institute for Research in Economics (IRENE)

W. Bentley MacLeod

Columbia University - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Multiple version iconThere are 3 versions of this paper

Date Written: January 2003

Abstract

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.

Suggested Citation

Currie, Janet and Farsi, Mehdi and MacLeod, William Bentley, Cut to the Bone? Hospital Takeovers and Nurse Employment Contracts (January 2003). NBER Working Paper No. w9428. Available at SSRN: https://ssrn.com/abstract=366465

Janet Currie (Contact Author)

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Mehdi Farsi

University of Neuchatel - Institute for Research in Economics (IRENE) ( email )

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William Bentley MacLeod

Columbia University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics ( email )

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Germany

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