Classic or new monopsony? Searching for evidence in nursing labor markets

The market for registered nurses (RNs) is often offered as an example of "classic" monopsony, while a "new" monopsony literature emphasizes that firm labor supply is upward sloping independent of market structure. Using data from multiple sources, we explore the relationship between nursing wages in hospitals and measures of classic and new, monopsony. Wage level analysis fails to provide support for classic monopsony, the relative wages of RNs in 240 U.S. labor markets being largely uncorrelated with hospital system concentration. Longitudinal analysis shows nursing wages declining with increases in hospital concentration. We interpret these results as providing support for classic monopsony effects in the short run, but question whether wage effects are sustained in the long run. No relationship is found between nursing wages and a new monopsony measure of mobility, but support for new monopsony is found for women elsewhere in the labor market. RNs display greater inter-employer mobility than do women (or men) in general. Two conclusions follow. First, upward sloping labor supply need not imply monopsonistic outcomes. Second, absent more compelling evidence, nursing should not be held up as a prototypical example of monopsony-classic or new. (c) 2005 Elsevier B.V. All tights reserved.