Testing for factor price equality with unobserved differences in factor quality or productivity

Andrew Bernard, Stephen Redding and Peter K. Schott

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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-codes: J31 J61 R23 (search for similar items in EconPapers)
Date: 2013-05
New Economics Papers: this item is included in nep-eff
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Citations: View citations in EconPapers (28)

Published in American Economic Journal: Microeconomics, May, 2013, 5(2), pp. 135-163. ISSN: 1945-7669

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Related works:
Journal Article: 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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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:59317

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