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Relative Wage Variation and Industry Location

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  • Andrew B. Bernard
  • Stephen Redding
  • Peter K. Schott
  • Helen Simpson

Abstract

Relative wages vary considerably across regions of the United Kingdom, with skill-abundantregions exhibiting lower skill premia than skill-scarce regions. This paper shows that thelocation of economic activity is correlated with the variation in relative wages. U.K. regionswith low skill premia produce different sets of manufacturing industries than regions withhigh skill premia. Relative wages are also linked to subsequent economic development: overtime, increases in the employment share of skill- intensive industries are greater in regionswith lower initial skill premia. Both results suggest firms adjust production across and withinregions in response to relative wage differences.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0614.

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Date of creation: Feb 2004
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Handle: RePEc:cep:cepdps:dp0614

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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Keywords: Deindustrialization; Relative Factor Prices; Diversification Cones;

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  1. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  2. Andrew B. Bernard & Stephen Redding & Peter K. Schott, 2005. "Factor Price Equality and the Economies of the United States," CEP Discussion Papers dp0696, Centre for Economic Performance, LSE.
  3. Patricia Rice & Anthony Venables, 2003. "Equilibrium Regional Disparities: Theory and British Evidence," Regional Studies, Taylor & Francis Journals, vol. 37(6-7), pages 675-686.
  4. Andrew B. Bernard & Stephen Redding & Peter K. Schott & Helen Simpson, 2002. "Factor price equalization in the UK?," LSE Research Online Documents on Economics 3704, London School of Economics and Political Science, LSE Library.
  5. Katz, Lawrence F & Murphy, Kevin M, 1992. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 35-78, February.
  6. Leamer, Edward E, 1987. "Paths of Development in the Three-Factor, n-Good General Equilibrium Model," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 961-99, October.
  7. Jackman, Richard & Savouri, Savvas, 1992. "Regional Migration in Britain: An Analysis of Gross Flows Using NHS Central Register Data," Economic Journal, Royal Economic Society, vol. 102(415), pages 1433-50, November.
  8. Gilles Duranton & Vassilis Monastiriotis, 2002. "Mind the Gaps: The Evolution of Regional Earnings Inequalities in the U.K., 1982-1997," Journal of Regional Science, Wiley Blackwell, vol. 42(2), pages 219-256.
  9. Griffith, Rachel, 1999. "Using the ARD Establishment Level Data to Look at Foreign Ownership and Productivity in the United Kingdom," Economic Journal, Royal Economic Society, vol. 109(456), pages F416-42, June.
  10. Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-87, December.
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Cited by:
  1. Neary, J. Peter & Tharakan, Joe, 2012. "International trade with endogenous mode of competition in general equilibrium," Journal of International Economics, Elsevier, vol. 86(1), pages 118-132.
  2. Anu Tokila & Hannu Tervo, 2011. "Regional differences in returns to education for entrepreneurs versus wage earners," The Annals of Regional Science, Springer, vol. 47(3), pages 689-710, December.
  3. repec:rdg:wpaper:em-dp2004-04 is not listed on IDEAS
  4. J Peter Neary & Joe Tharakan, 2005. "Endogenous Mode of Competition in General Equilibrium," Working Papers 200526, School Of Economics, University College Dublin.

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