Monopsony in Professional Labor Markets: Hospital System Concentration and Nurse Wages

Abstract

Rolling waves of consolidation have significantly decreased the number of hospital systems in the U.S. potentially affecting industry quality, prices, efficiency, wages and more. This research concerns the growth in hospital system consolidation in local labor markets and its effect on registered nurse wages. We first use a nonparametric preprocessing data step via matching methods to define MSA-specific samples of workers analogous to nurses outside of the hospital sector. This step enables an accounting of heterogeneous MSA-specific baseline wage growth and yields a standardized measure of nurse wage growth across MSAs used to set up a multi-site quasi-experiment. We then run a parsimonious linear model; market size matters, for every 0.1 increase in consolidation in smaller-MSAs, real hourly nurse wage growth decreased by $0.70 (p-value of 0.038). Though not the primary aim of this study, a secondary finding is that real hourly wages for nurses grew less than that of comparable workers by $4.08.

Keywords: Monopsony, hospital consolidation, imperfect competition, matching methods for data preprocessing.

JEL Classification: C55, I11, J01, J42