Despite evidence that hospital use of licensed practical nurses (LPNs) declined in the 1990s, the current registered nurse (RN) shortage has prompted interest in LPNs as substitutes for RNs. Hospitals, being the dominant employer of RNs, have an economic incentive to use less expensive LPNs as substitutes. Beside wages, there are several forces underlying hospital demand for LPNs. In this article, the authors model and estimate hospital demand for LPNs as a function of nurse wages and hospital, market, and patient characteristics using a longitudinal data set of short-term general hospitals in the United States. The authors find evidence that higher RN wages increase hospital demand for LPNs, both in levels and relative to RNs, suggesting that hospitals at least partially substitute RNs with LPNs.
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