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

Andrew Bernard, Stephen Redding and Peter Schott

Working Papers from U.S. Census Bureau, Center for Economic Studies

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 non-production 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.

Keywords: Factor Price Equality; Regional Wages; Neoclassical Trade; Labor Market Areas (search for similar items in EconPapers)
JEL-codes: C14 F16 J30 R23 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2012-09
New Economics Papers: this item is included in nep-int
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https://www2.census.gov/ces/wp/2012/CES-WP-12-32.pdf First version, 2012 (application/pdf)

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 (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:12-32

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