Location of health professionals: The supply side
Section snippets
. Introduction
Urban/regional analysis has provided many key insights into the allocation of resources both within and among cities. The “open city” model allows analysts to look at the simultaneous determination of wages and rents across a system of cities explaining how:
- 1.
The increased productivity of large cities (or metropolitan areas) is capitalized into higher land rents and higher labor wages, which leads to a system of cities in which long-run equilibrium rents, wages, and their ratios will vary in
Geographic differences
Wages for health professionals vary widely across U.S. MSAs. Table 1 shows that the Medicare Wage Index for large MSAs ranges from 0.8862 (Louisville KY-IN) to 1.7396 (San Jose CA). Among all MSAs (excluding Puerto Rico), the range is from 0.6768 (Morristown TN) to 1.8062 (Santa Cruz CA), a factor of 2.67. While some of these differences relate to cost-of-living variations, they also reflect differences in capital endowments and factor productivity.
Health care professionals are also distributed
The empirical content
This section specifies regressions to estimate equilibrium wages, rents, and wage-rental ratios. It then develops a two-stage model to estimate labor supply across metropolitan areas.
One would expect wages of health-related workers, and rents paid for both production and living facilities to be higher in larger metropolitan areas. This correlation relates to potentially higher capital-labor ratios, and to increasing returns to scale until congestion or logistical control problems offset the
Data
The analysis uses four separate databases for the year 2013.
- a)
Occupational Employment Statistics Survey, by the Bureau of Labor Statistics, 2013. This database aggregates employment data at multiple geographic levels for numbers of participants, mean and median wages.
- b)
Fair Market Rent measures, distributed by the Department of Housing and Urban Development. Although most formal economic theory refers to land rents, the FMR measures the market dwelling unit rents that will presumably equalize
The RN sectors
The preceding analyses examine a health services population ranging from licensed practical nurses, pharmacists, and physical therapists, to surgeons. The heterogeneity internalizes substitution, sorting, and selection among the occupations. However, the underlying urban models imply homogeneity among land renters (for consumers) and among laborers (for firms). The rent conditions imply similar consumers competing with each other for dwelling units or land parcels; likewise, the equal-profit
Interpreting the supply elasticities
The cross-MSA wage elasticities for the all health category (estimated in Section 4.2) varied from 3.47 to 7.20. For RNs (estimated in Section 6) they varied from 0.22 to 0.43. How good are these estimates? There has been a substantial literature on nursing supply, often related to perceived shortages. The nursing supply wage elasticities here are consistent with estimates by Antonazzo et al. (2003) and Shields (2004).
The “all health” supply elasticity estimates are higher, and it is difficult
Final observations and conclusions
The study has addressed an intersection of urban and health economics, the influence of agglomeration on productivity and therefore rents paid and wages earned by health services professionals. It validates the urban perspective that agglomerations imply higher wages and higher rents, and hence justifies the gathering of healthcare professionals in large cities and medical centers. It explains how, from a health economics perspective, differing factor costs cause health care provision to vary
Acknowledgments
We are grateful to Mr. Bilal Ali for research assistance, and to the journal editor, and two anonymous referees for useful comments. All remaining errors are our own.
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