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  3. American Economic Review
  4. February 2021
  5. Employer Consolidation and Wages: Evidence from Hospitals

Employer Consolidation and Wages: Evidence from Hospitals

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Abstract

We test whether wage growth slows following employer consolidation by examining hospital mergers. We find evidence of reduced wage growth in cases where both (i) the increase in concentration induced by the merger is large and (ii) workers' skills are industry-specific. In all other cases, we fail to reject zero wage effects. We consider alternative explanations and find that the observed patterns are unlikely to be explained by merger-related changes besides labor market power. Wage growth slowdowns are attenuated in markets with strong labor unions, and wage growth does not decline after out-of-market mergers that leave local employer concentration unchanged.

Citation

Prager, Elena, and Matt Schmitt. 2021. "Employer Consolidation and Wages: Evidence from Hospitals." American Economic Review, 111 (2): 397-427. DOI: 10.1257/aer.20190690

Additional Materials

JEL Classification

  • G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
  • I11 Analysis of Health Care Markets
  • J22 Time Allocation and Labor Supply
  • J24 Human Capital; Skills; Occupational Choice; Labor Productivity
  • J31 Wage Level and Structure; Wage Differentials
  • J42 Monopsony; Segmented Labor Markets
  • R32 Other Spatial Production and Pricing Analysis