Relative Wage Variation and Industry Location
27 Pages Posted: 28 Sep 2003 Last revised: 29 Oct 2022
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Relative Wage Variation and Industry Location
Date Written: September 2003
Abstract
Relative wages vary considerably across regions of the United Kingdom, with skill-abundant regions exhibiting lower skill premia than skill-scarce regions. This paper shows that the location of economic activity is correlated with the variation in relative wages. U.K. regions with low skill premia produce different sets of manufacturing industries than regions with high skill premia. Relative wages are also linked to subsequent economic development: over time, increases in the employment share of skill-intensive industries are greater in regions with lower initial skill premia. Both results suggest firms adjust production across and within regions in response to relative wage differences.
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