Association for Public Policy Analysis & Management

This paper estimates the labor market effects of firm consolidation in competitive labor markets. Specifically, the paper examines the effect of two types of hospital consolidation, mergers and system -joinings, on the wages and employment levels of both registered nurses and licensed practical nurses in markets that are characterized as competitive. Using data from the American Hospital Association’s Annual Survey, I study whether competitive conduct decreases as the number of firms decrease and specifically at what number of firms a monopsonistic market begins to appear. Given that the exploitation of monopsony power has long been feared in the market for nurses and given as an explanation for persistent shortages, it is imperative to understand the characteristics that promote competitive conduct in the labor market.