Below is the abstract of a recent National Bureau of Economic Research working paper entitled “Human capital and organizational performance: evidence from the health care sector” by Ann Bartel, Ciaran Phibbs, Nancy Beaulieu, and Patricia Stone (2011):

This paper contributes to the literature on the relationship between human capital and organizational performance. We use detailed longitudinal monthly data on nursing units in the Veterans Administration hospital system to identify how the human capital (general, hospital-specific and unit or team-specific) of the nursing team on the unit affects patients’ outcomes. Since we use monthly, not annual, data, we are able to avoid the omitted variable bias and endogeneity bias that could result when annual data are used. Nurse staffing levels, general human capital, and unit-specific human capital have positive and significant effects on patient outcomes while the use of contract nurses, who have less specific capital than regular staff nurses, negatively impacts patient outcomes.

Policies that would increase the specific human capital of the nursing staff are found to be cost-effective.

General human capital includes the sorts of broad skills that people might learn during schooling; these sorts of skills apply to many kinds of work settings. By contrast, specific human capital includes the sorts of skills and knowledge that someone might learn while working on the job. Such skills cannot readily be translated to other jobs within the hospital, or even to the same job at another hospital. Why might contract nurses, who are typically hired for short periods of time by hospitals to fill unexpected scheduling holes, tend to have negative impacts on patient outcomes?

Speculate about the sorts of specific human capital that might give regular nurses an advantage over contract nurses in helping patients. Can this help explain the positive volume–outcome relationship observed in hospitals?