Question

In 150 words! The market for nurses has characteristics of monopsony. In your own words, outline arguments on both sides of this statement. Which side is correct in your opinion? Explain your reasoning. Please no duplicate answers!

Answer 1

Monopsony:

The market for hospital nurses if literally an exact example of monopsony in labor market. But even in cases of nurses, there is less evidence on quantitative significance of employer market power. A natural measure of importance of monopsony is the inverse elasticity of supplying nursing services to an individual hospital. The elasticity is dependant on the length of relevant time period in aspects such as whether or not the hospital is located at a large city or on the nature of oligopsony equilibrium chatacterizing the interactions among hospitals also investigated. The market for nurses is chatacterized by sunstantial employer market power - a famous hypothesis.

Not monopsony :

Oligopsonic markets contain small number of discriminatory employers who can have significant effects on wages. Nurses with minimum wages have two opposing effects: the employment increasing oligospony effect and employment reducing exit effects. Under oligopsony, employers hire more nurses since the equilibrium wage rate is strictly less than marginal health care cost. Nurses are not paid their marginal costs and they do not have sufficient incetives to invest in training.

In my reasoning, the market for nurses does have characteristics of monopsony based on factual evidences and statistics.