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Testing for Factor Price Equality in the Presence of Unobserved Factor Quality Diferences

Author

Listed:
  • Andrew Bernard
  • Stephen Redding
  • Peter Schott

Abstract

We develop a method for identifying departures from relative factor price equality across regions that is valid under general assumptions about production, markets and factors. Application of this method to the United States reveals substantial and increasing deviations in relative skilled wages across labor markets in both 1972 and 1992. These deviations vary systematically with labor markets .industry structure both in the cross section and over time.

Suggested Citation

  • 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.
  • Handle: RePEc:cen:wpaper:09-22
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    File URL: https://www2.census.gov/ces/wp/2009/CES-WP-09-22.pdf
    File Function: First version, 2009
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    More about this item

    Keywords

    Factor Price Equality; Regional Wages; Neoclassical Trade Theory; Labor Market Areas;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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