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Factor Price Equalization in the UK?

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Author Info

  • Andrew B. Bernard

    ()
    (Tuck School of Business)

  • Stephen J. Redding

    ()
    (London School of Economics & Political Science (LSE))

  • Peter K. Schott

    ()
    (School of Management)

  • Helen Simpson

    ()
    (General)

Abstract

This paper develops a general test of factor price equalization that is robust to unobserved regional productivity differences, unobserved region-industry factor quality differences and variation in production technology across industries. We test relative factor price equalization across regions of the UK. Although the UK is small and densely-populated, we find evidence of statistically significant and economically important departures from relative factor price equalization. Our estimates suggest three distinct relative factor price areas with a clear spatial structure. We explore explanations for these findings, including multiple cones of diversification, region-industry technology differences, agglomeration and increasing returns to scale.

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Bibliographic Info

Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm287.

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Date of creation: 21 Jun 2002
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Handle: RePEc:ysm:somwrk:ysm287

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Web page: http://icf.som.yale.edu/
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Keywords: Relative Factor Prices; Diversification Cones; Technology; Economic Geography;

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References

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Citations

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Cited by:
  1. Andrew B. Bernard & Stephen Redding & Peter K. Schott & Helen Simpson, 2002. "Factor Price Equalization in the UK?," CEP Discussion Papers dp0547, Centre for Economic Performance, LSE.
  2. Dustmann, Christian & Glitz, Albrecht, 2011. "How Do Industries and Firms Respond to Changes in Local Labor Supply?," IZA Discussion Papers 6257, Institute for the Study of Labor (IZA).
  3. Goolsbee, Austan, 2004. "The impact of the corporate income tax: evidence from state organizational form data," Journal of Public Economics, Elsevier, vol. 88(11), pages 2283-2299, September.
  4. Leena Kerkelä & Aki Kangasharju & Sari Pekkala, 2003. "Factor Price Equalization in Finland," ERSA conference papers ersa03p394, European Regional Science Association.
  5. Rice, Patricia & Venables, Anthony J. & Patacchini, Eleonora, 2006. "Spatial determinants of productivity: Analysis for the regions of Great Britain," Regional Science and Urban Economics, Elsevier, vol. 36(6), pages 727-752, November.
  6. Andrew B. Bernard & Stephen Redding & Peter K. Schott & Helen Simpson, 2003. "Relative Wage Variation and Industry Location," NBER Working Papers 9998, National Bureau of Economic Research, Inc.
  7. Xiang, Chong, 2007. "Diversification cones, trade costs and factor market linkages," Journal of International Economics, Elsevier, vol. 71(2), pages 448-466, April.
  8. Ethan Lewis, 2003. "Local, open economies within the U.S.: how do industries respond to immigration?," Working Papers 04-1, Federal Reserve Bank of Philadelphia.
  9. Ethan Lewis, 2004. "How did the Miami labor market absorb the Mariel immigrants?," Working Papers 04-3, Federal Reserve Bank of Philadelphia.

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