Testing for Factor Price Equality with Unobserved Differences in Factor Quality or Productivity

Andrew Bernard, Stephen Redding and Peter Schott

American Economic Journal: Microeconomics, 2013, vol. 5, issue 2, 135-63

Abstract: We develop a method for identifying departures from relative factor price equality that is robust to unobserved variation in factor productivity. We implement this method using data on the relative wage bills of nonproduction and production workers across 170 local labor markets comprising the continental United States for 1972, 1992, and 2007. We find evidence of statistically significant differences in relative wages in all three years. These differences increase in magnitude over time and are related to industry structure in a manner that is consistent with neoclassical models of production. (JEL J31, J61, R23)

JEL-codes: J31 J61 R23 (search for similar items in EconPapers)
Date: 2013
Note: DOI: 10.1257/mic.5.2.135
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Citations: View citations in EconPapers (34)

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Related works:
Working Paper: Testing for factor price equality with unobserved differences in factor quality or productivity (2013)
Working Paper: Testing for Factor Price Equality with Unobserved Differences in Factor Quality or Productivity (2012)
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