Jordan D. Matsudaira

Monopsony in the Low-Wage Labor Market? Evidence from Minimum Nurse Staffing Regulations

This paper provides direct evidence on the extent of monopsony power in the low-wage labor market by estimating the firm-level elasticity of labor supply for nurse aides in the long-term care (nursing home) industry. Using exogenous variation in hiring induced by the passage of a state minimum nurse staffing law, I find that facilities initially out of compliance with the new law did not have to raise their wage offers relative to their competitors in order to hire more nurses. While this is consistent with perfect competition in simple monopsony models of the labor market, I discuss how the results may be more ambiguous in more complicated models.

Government Regulation and the Quality of Healthcare: Evidence from Minimum Staffing Legislation for Nursing Homes

This paper investigates the effect of a regulation mandating a minimum nurse-staffing level on the quality of healthcare in nursing homes. To comply with the regulation, firms increase employment of nurses in proportion to the gap between their initial staffing level and the legislated minimum threshold. If higher nurse staffing causes better quality, then the changes in quality outcomes should mirror these changes. Despite inducing increases in nurse aide hours of 10 percent on average and up to 30 percent for some firms, I find no impact of the regulation on patient outcomes or overall facility quality.

Monopsony in Health Labor Markets

In recent years there has been a surge in interest in models of imperfect competition in the labor market, and monopsony in particular. Although economists have long been skeptical that employers have market power in the typical labor market, high reported vacancies for nursing positions have fueled speculation that health labor markets may be an exception at least since the writings of Donald Yett in the late-1960s. Early waves of research focused on the idea that large employers, like a hospital, could effectively monopolize employment opportunities for health workers (e.g., nurses) and depress wages. Newer work has focused on other more mundane sources of monopsony, and produced a wealth of interesting results that have challenged conventional thinking on the functioning of labor markets.