Employer consolidation and wages: Evidence from hospitals

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WP-Employer Consolidation-Prager-Schmitt-20190226

Elena Prager, Northwestern University
Matt Schmitt, University of California, Los Angeles


We test whether wage growth slows following employer consolidation by examining a decade of hospital mergers. To isolate the effects of changes in concentration due to mergers, we estimate difference-in-differences models comparing wage growth in markets with mergers to wage growth in markets without 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 at least somewhat industry-specific. Following such mergers, annual wage growth is 1.1pp slower for skilled non-health professionals and 1.7pp slower for nursing and pharmacy workers than in markets without mergers. In all other cases, we fail to reject zero wage effects. We argue that the observed patterns are unlikely to be explained by merger-related changes aside from labor market power. Wage growth slowdowns appear to be attenuated in markets with strong labor unions, and we do not observe reduced wage growth after out-of-market mergers that leave employer concentration unchanged. In a simple theoretical framework, we show how integrating negative wage effects can lead to more mergers being opposed by antitrust regulators, even without departing from a consumer welfare standard.

February 26, 2019


Elena Prager Matt Schmitt


Anticompetitive Conduct

Bargaining Power



Wage Stagnation


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