Working Paper: CEPR ID: DP5111
Authors: Andrew Bernard; Stephen Redding; Peter Schott
Abstract: We develop a methodology for identifying departures from relative factor price equality across regions that is valid under general assumptions about production, markets and factors. Application of this methodology to the United States reveals substantial and increasing deviations in relative skilled wages across labour markets in both 1972 and 1992. These deviations vary systematically with labour markets? industry structure both in cross section and over time.
Keywords: factor price equality; labour market areas; neoclassical trade theory; regional wages
JEL Codes: C14; F16; J30; R23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| relative wage differences (J31) | susceptibility of workers to domestic and international trade shocks (F66) |
| larger relative wage differences (J31) | smaller number of industries produced in common between labor markets (J49) |
| relative wage differences (J31) | evolution of labor market structures (J42) |
| degree of relative wage polarization (J31) | number of labor markets exhibiting median relative wages (J49) |
| quality-adjusted skill premium in Nashville vs. New York City (J39) | relative wage differences (J31) |