Will Increased Wages Reduce Shortage of Nurses? A Panel Data Analysis of Nurses' Labor Supply

Abstract

Shortage of nurses is a problem in several countries. It is an unsettled question whether increasing wages constitute a viable policy for extracting more labor supply from nurses. In this paper we use a unique matched panel data set of Norwegian nurses covering the period 1993-1997 to estimate wage elasticities. This data includes detailed information on 18,066 individuals over 5 years totaling 56,832 observations. The estimated elasticity when controlling for individual and time invariant fixed effects is significantly positive but not very high in magnitude. Individual and institutional features are significant and important for working hours. We have also access to information about contractual arrangements. It turns out that shift work is important for hours of work, and that omitting information about this common phenomenon will underestimate the wage effect.Nurses, labor supply, panel data, selection