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Alleviating Worker Shortages Through Targeted Subsidies: Evidence from Incentive Payments in Healthcare

Author

Listed:
  • Ashvin Gandhi
  • Andrew Olenski
  • Krista J. Ruffini
  • Karen Shen

Abstract

Worker shortages are common in many industries. This paper examines the effect of government subsidies to address these shortages in the context of a reform that tied Medicaid payments to nursing home staffing levels. We find that the reform substantially increased staffing, especially for facilities serving many Medicaid patients. Facilities responded primarily by hiring workers in lower-wage roles rather than increasing hours of incumbent or high-wage staff. This contrasts with null effects we estimate for a non-incentivized rate increase, suggesting that the incentive structure of government payments—rather than just the level—is key to boosting employment in sectors facing worker shortages.

Suggested Citation

  • Ashvin Gandhi & Andrew Olenski & Krista J. Ruffini & Karen Shen, 2024. "Alleviating Worker Shortages Through Targeted Subsidies: Evidence from Incentive Payments in Healthcare," NBER Working Papers 32412, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32412
    Note: AG EH
    as

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    More about this item

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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