Human Health Care and Selection Effects. Understanding Labour Supply in the Market for Nursing

The aim of this paper is to study (adverse) selection in a labour supply model where potential applicants are characterised by different vocational levels and skills. We look at how the composition of the pool of active workers changes as the wage rate increases. Contrary to what would expect, average productivity does not necessarily increase monotonically in the wage rate. We identify conditions in which a wage increase reduces the average productivity and/or average vocation of active workers. Our results help understand the potential impact of wage increases as a policy designed to resolving shortages in the labour market for nurses.