Labor Market Efficiency and Spot Market Dynamics in Nursing

This National Bureau of Economic Research working paper by Alexandre Mas analyzes hiring strategies under uncertainty, comparing permanent labor buffers against spot market hiring. The study develops a model where individual firms fail to internalize the positive externalities of thickening the spot market for others, leading to excessive buffering in competitive equilibrium. Using comprehensive daily timesheet data from skilled nursing facilities, the research validates these general equilibrium predictions. Findings indicate that markets with robust agency presence experience less rationing and compressed permanent staffing distributions. Post-COVID analysis reveals increased market efficiency and significant welfare gains from reduced spot market frictions. Crucially, the study estimates that the marginal external benefit of utilizing spot labor over permanent hires averages seven percent of wages. The author concludes that the current labor market structure underprovides flexibility because the value of immediate availability is not fully priced, suggesting potential policy implications for optimizing labor market dynamics and reducing inefficiencies in healthcare staffing.