Mehdi Farsi

First name
Mehdi
Last name
Farsi
Abstract

This paper uses data from the 1990s to examine changes in the wages, employment, and
e¤ort 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 rm
market power to be associated with declines in wages. However, a basic contracting model
predicts e¤ects on e¤ort rather than on wages, which is what we see in the data nurses
see few declines in wages following takeovers, but see increases in the number of patients per
nurse, our measure of e¤ort. We show that our results are also consistent with an extended
version of the monopsony model that considers e¤ort, and allows for revenue shifts following
a takeover. Finally, we nd that these changes are similar in the largest for-pro t and
non-pro t chains, suggesting that market forces are more important than institutional form.

Year of Publication
2004
Number
485
Date Published
04/2004
Publication Language
eng
Citation Key
8127
Currie, J., MacLeod, B., & Farsi, M. (2004). Cut to the Bone? Hospital Takeovers and Nurse Employment Contracts. Retrieved from http://arks.princeton.edu/ark:/88435/dsp011g05fb611 (Original work published April 2004)
Working Papers