The Deadly Consequences of Labor Scarcity: Evidence from German Hospitals
Abstract: Skilled labor scarcity is a major economic challenge in developed countries. Albeit present across industries, it is especially a pressing issue in the healthcare sector due to its size and importance. This paper studies how the shortage of nurses affects the provision of hospital services and patients’ health. I leverage exogenous variation induced by a Swiss monetary policy that led to a sudden and strong outflow of nurses in German hospitals. Based on administrative data covering the universe of hospitals and inpatient cases in Germany combined with a matched difference-in-differences design, I show that labor scarcity substantially alters the provision of healthcare services, increases mortality, and lowers life expectancy.
This paper is work in progress. However, a short threat with preliminary results can be found below.
A short threat
Fig. 1: Number of German cross-border commuters newly starting to work in the Swiss healthcare sector each quarter
As a response to a Swiss monetary policy, more Germans started taking up jobs in the Swiss healthcare sector. Due to low legal barriers and high demand in Switzerland, this was driven by registered nurses formerly working in German hospitals close to the border. Other occupations in- or outside the healthcare sector were not affected.
Fig. 2: The effect of the policy on patients' probability of receiving surgery
Consequently, the care intensity worsened for patients treated in German hospitals close to the border as the number of registered nurses decreased, but the number and composition of patients remained the same. Hospitals reacted by altering their services: Compared to similar patients treated in hospitals in similar counties, patients in border counties thereafter received surgery less likely.
Fig. 3: The effect of the policy on patients' probability of deceasing
The reduced care intensity translates into an increased mortality for patients treated in hospitals close to the border. This effect does not seem to be driven by the quality but by the quantity of services, as, for instance, the mortality for patients receiving surgery does not increase.
Fig. 4: The effect of the policy on life expectancy
Given that hospitals seem to react to nursing shortages by reducing the quantity of services, potentially causing long-run consequences for patients, hospital-level mortality likely underestimates the overall health effect. Looking at changes in regional life expectancy, a proxy for changing mortality, confirms that labor scarcity in hospitals induces profound negative health effects. Various robustness checks indicate that these effects are unlikely driven by changing circumstances at the border or compositional effects.