Scandinavian Working Papers in Economics

HERO On line Working Paper Series,
Oslo University, Health Economics Research Programme

No 2004:9: Nurses’ labor supply with endogenous choice of care level and shift type A nested discrete choice model with nonlinear income

Erik Magnus Sæther ()
Additional contact information
Erik Magnus Sæther: Ragnar Frisch Centre for Economic Research, Postal: Gaustadalléen 21, , N-0349 Oslo, Norway

Abstract: Shift work has a documented negative impact on workers’ health and social life, effects which are compensated for with higher wages and shorter working hours. Many countries face a ‘nursing shortage’, and increasing wages is argued to lead to an increase in the short-term labor supply in health care. Omitting shift work in the evaluation of such policies may lead to biased estimates of the wage elasticities. Focusing on registered nurses (RN) employed in the public health sector, this paper presents an econometric analysis that allows the nurses to compose their ‘job package’ in three steps by choosing: a) hospital or primary care, b) daytime or shift work and c) one of four categories of hours. The utility maximization problem is solved by discretizing the budget set and choosing the optimal job package from a finite set of alternatives. The nested structure is estimated on Norwegian micro data. There is some variation in the responsiveness to wage between shift and day workers and by care level. The job-specific elasticities are small but positive. However, the simulation of a wage increase in all job types, when conditioning the analysis to those already participating in the sector, indicates a slight reduction in hours. Thus, the income effect seems to dominate in the labor supply of nurses.

Keywords: Registered nurses; discrete choice; labor supply; selection; nested logit; sector-specific wages

JEL-codes: C25; I10; J22

28 pages, June 14, 2009

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