Employer Consolidation and Wages: Evidence from Hospitals

Prager, Elena; Schmitt, Matthew

doi:10.2139/ssrn.3391889

Cited by 18 publications

(10 citation statements)

References 27 publications

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“…In traditional Cournot models, the effect of concentration on wages is mediated by the elasticity of labor supply facing the firm. Our results suggest approaching the interpretation of recent studies with some caution (including Azar, Marinescu, andSteinbaum (2017),Rinz et al (2018), Arnold (2019) and Prager and Schmitt (2019), which show negative effects of employment concentration on wages through the lens of the Cournot model). First, even low concentration areas may have substantial monopsony power, with policy implications as in Naidu and Posner (2019).…”

Section: Robustness and Heterogeneitysupporting

confidence: 56%

Monopsony in Movers

2021

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We estimate the impact of the firm component of hourly wage variation on separations from matched Oregon employer-employee data. We use both firm fixed effects estimated from a wage equation as well as a matched IV event study around employment transitions between firms. Separations decline with firm wage policies: the implied firm-level labor supply elasticities are around 4, consistent with recent quasiexperimental evidence, but 3 to 4 times larger than existing estimates using individual wages. We find that monopsonistic competition is pervasive, even in low-wage, high turnover sectors, but with little heterogeneity by labor market concentration.* Dube acknowledges support from the Washington Center for Equitable Growth. An Online Appendix can be found at http://jhr.uwpress.org/. This paper uses confidential data from Oregon's Unemployment Insurance payroll records, which we obtained as part of a data sharing agreement with the state. To enquire about access, contact the Oregon Employment Department (OED, phone number: 503-947-1394). We gratefully acknowledge the generous help given by the staff at OED.

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Section: Robustness and Heterogeneitysupporting

confidence: 56%

Monopsony in Movers

2021

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“…Claims have been made that the concentration of employers is growing in labor markets and that more concentrated employer markets are associated with lower wages (Azar, Marinescu, and Steinbaum 2017;Azar et al 2018;Posner, Weyl, and Naidu 2018). 6 To the extent that these forces trended toward more monopsony power or more exercise of monopsony power over recent decades, the declining cost of labor, typically a variable cost, may have contributed to the trend in markups.…”

Section: Growing Monopsony Powermentioning

confidence: 99%

Do Increasing Markups Matter? Lessons from Empirical Industrial Organization

Berry

Gaynor

Morton

2019

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any economists and policymakers are expressing concern over the possibility of increasing monopoly power in the US and the world economy. There have been decades of research in industrial organization devoted to understanding how one can (and cannot) reliably learn about the causes and consequences of market power and markups-that is, a positive difference between price and marginal cost. Starting about 30 years ago (Bresnahan 1989), the field of industrial organization adopted methods for understanding firm conduct and markets on the basis of the relevant economic primitives: demand, cost, and pricing conduct. Thus, under the assumptions that firms maximize profits and have to cover their total costs, the equilibrium price (and other outcomes, such as product choice, location, quality, and innovation) will be determined by demand, marginal costs, and fixed (possibly sunk) costs, along with the conditions of competition that shape pricing behavior. These conditions are modeled using modern game theory to incorporate imperfect competition, product differentiation, multiproduct firms, and firm entry, as well as a host of industry-specific institutions.

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“…Linkages can also arise between mergers and increased monopsony power. Prager and Schmitt (2019) examine the effect of mergers in the hospital industry and find evidence that mergers between nearby hospitals depress wage growth for workers with hospital-job-specific skills (but not for workers with general job market skills). 7 The Washington State attorney general has challenged these noncompete agreements and by 2019 had achieved many dozens of settlements to not enforce and to remove the provisions.…”

Section: Growing Monopsony Powermentioning

confidence: 99%

Do Increasing Markups Matter? Lessons from Empirical Industrial Organization

Berry

Gaynor

Morton

2019

Journal of Economic Perspectives

139

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This article considers the recent literature on firm markups in light of both new and classic work in the field of industrial organization. We detail the shortcomings of papers that rely on discredited approaches from the “structure-conduct-performance” literature. In contrast, papers based on production function estimation have made useful progress in measuring broad trends in markups. However, industries are so heterogeneous that careful industry-specific studies are also required, and sorely needed. Examples of such studies illustrate differing explanations for rising markups, including endogenous increases in fixed costs associated with lower marginal costs. In some industries there is evidence of price increases driven by mergers. To fully understand markups, we must eventually recover the key economic primitives of demand, marginal cost, and fixed and sunk costs. We end by discussing the various aspects of antitrust enforcement that may be of increasing importance regardless of the cause of increased markups.

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Employer Consolidation and Wages: Evidence from Hospitals

Cited by 18 publications

References 27 publications

Monopsony in Movers

Monopsony in Movers

Do Increasing Markups Matter? Lessons from Empirical Industrial Organization

Do Increasing Markups Matter? Lessons from Empirical Industrial Organization

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