Testing for Factor Price Equality in the Presence of Unobserved Factor Quality Differences
Andrew B. Bernard
Tuck School of Business at Dartmouth; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)
Stephen J. Redding
Peter K. Schott
Yale University - School of Management; National Bureau of Economic Research (NBER)
August 1, 2009
Tuck School of Business Working Paper No. 2009-71
US Census Bureau Center for Economic Studies Paper No. CES-WP 09-22
We develop a method for identifying departures from relative factor price equality across regions that is valid under general assumptions about production, markets and factors. Application of this method to the United States reveals substantial and increasing deviations in relative skilled wages across labor markets in both 1972 and 1992. These deviations vary systematically with labor markets industry structure both in the cross section and over time.
Number of Pages in PDF File: 39
Keywords: Factor Price Equality, Regional Wages, Neoclassical Trade Theory, Labor Market
JEL Classification: F16, J30, R23, C14
Date posted: September 20, 2009
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