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Relative Factor Abundance and Relative Factor Price Equality in Punjab

Author

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  • Resham Naveed

    (Teaching Fellow, Lahore School of Economics.)

Abstract

This study tests the relative factor price equality across districts in Punjab using the methodology developed by Bernard, Redding, and Schott (2009) and data from the Census of Manufacturing Industries for 2000/01 and 2005/06. The results indicate the absence of relative factor price equalization due to the uneven distribution of factors in the province. Nonproduction (white-collar) workers) are relatively scarce in Punjab, which results in a wage premium for this type of labor. The study adjusts for worker quality by using a Mincerian wage equation as worker quality could explain the wage differential between white-collar and blue-collar workers. However, this exercise yields similar results, implying that factors are distributed unevenly across the districts of Punjab even after controlling for worker quality differences.

Suggested Citation

  • Resham Naveed, 2015. "Relative Factor Abundance and Relative Factor Price Equality in Punjab," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 20(1), pages 105-133, Jan-June.
    • Handle: RePEc:lje:journl:v:20:y:2015:i:1:p:105-133
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    References listed on IDEAS

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    1. Andrew B. Bernard & Raymond Robertson & Peter K. Schott, 2010. "Is Mexico a Lumpy Country?," Review of International Economics, Wiley Blackwell, vol. 18(5), pages 937-950, November.
    2. Paul N. Courant & Alan V. Deardorff, 2011. "International Trade with Lumpy Countries," World Scientific Book Chapters, in: Robert M Stern (ed.), Comparative Advantage, Growth, And The Gains From Trade And Globalization A Festschrift in Honor of Alan V Deardorff, chapter 14, pages 141-154, World Scientific Publishing Co. Pte. Ltd..
    3. Andrew Bernard & Stephen Redding & Peter Schott, 2009. "Testing for Factor Price Equality in the Presence of Unobserved Factor Quality Diferences," Working Papers 09-22, Center for Economic Studies, U.S. Census Bureau.
    4. Debaere, Peter & Demiroglu, Ufuk, 2003. "On the similarity of country endowments," Journal of International Economics, Elsevier, vol. 59(1), pages 101-136, January.
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    7. Alan V. Deardorff, 2011. "The possibility of factor price equalization, revisited," World Scientific Book Chapters, in: Robert M Stern (ed.), Comparative Advantage, Growth, And The Gains From Trade And Globalization A Festschrift in Honor of Alan V Deardorff, chapter 15, pages 155-163, World Scientific Publishing Co. Pte. Ltd..
    8. Helge Berger & Frank Westermann, 2001. "Factor price equalization? The cointegration approach revisited," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 137(3), pages 525-536, September.
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    Cited by:

    1. Theresa Chaudhry & Muhammad Haseeb & Maryiam Haroon, 2017. "Economic geography and misallocation in Pakistan’s manufacturing hub," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 59(1), pages 189-208, July.

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    More about this item

    Keywords

    Sector price; wages; equality; Punjab; Pakistan.;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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