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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.

Suggested Citation

  • Andrew B. Bernard & Stephen Redding & Peter K. Schott & Helen Simpson, 2004. "Relative Wage Variation and Industry Location," CEP Discussion Papers dp0614, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp0614
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    1. Bernard, Andrew & Redding, Stephen & Simpson, Helen & Schott, Peter, 2002. "Factor Price Equalization in the UK?," CEPR Discussion Papers 3523, C.E.P.R. Discussion Papers.
    2. Lawrence F. Katz & Kevin M. Murphy, 1992. "Changes in Relative Wages, 1963–1987: Supply and Demand Factors," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 35-78.
    3. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2001. "Factor Price Equality and the Economies of the United States," NBER Working Papers 8068, National Bureau of Economic Research, Inc.
    4. 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.
    5. 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 1433-1450, November.
    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 961-999, October.
    7. 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, May.
    8. Patricia Rice & Anthony Venables, 2003. "Equilibrium Regional Disparities: Theory and British Evidence," Regional Studies, Taylor & Francis Journals, vol. 37(6-7), pages 675-686.
    9. Rachel Griffith, 1999. "Using the ARD establishment level data to look at foreign ownership and productivity in the UK," IFS Working Papers W99/06, Institute for Fiscal Studies.
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    11. Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-987, December.
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    Cited by:

    1. Anu Tokila & Hannu Tervo, 2011. "Regional differences in returns to education for entrepreneurs versus wage earners," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 47(3), pages 689-710, December.
    2. J. Peter Neary & Joe Tharakan, 2005. "Endogenous mode of competition in general equilibrium," Working Papers 200526, School of Economics, University College Dublin.
    3. 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.
    4. repec:rdg:wpaper:em-dp2004-04 is not listed on IDEAS
    5. Noel Gaston & Douglas R. Nelson, 2013. "Bridging Trade Theory And Labour Econometrics: The Effects Of International Migration," Journal of Economic Surveys, Wiley Blackwell, vol. 27(1), pages 98-139, February.
    6. Eiichi Tomiura, 2005. "Factor Price Equalization In Japanese Regions," The Japanese Economic Review, Japanese Economic Association, vol. 56(4), pages 441-456, December.
    7. Constantina Kottaridi & Fragkiskos Filippaios & Marina Papanastassiou & Robert Pearce, 2013. "Regional Mix and the Roles of Foreign Subsidiaries: A New Conceptualization and Empirical Evidence on the UK Case," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 63(1-2), pages 47-74, June.
    8. Cortez, Willy Walter & Islas-Camargo, Alejandro, 2009. "How Correlated are Mexico’s Salaries and Us Output? an Inquiry on Some Us Border Cities," Panorama Económico, Escuela Superior de Economía, Instituto Politécnico Nacional, vol. 0(08), pages 35-62, primer se.

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    More about this item

    Keywords

    Deindustrialization; Relative Factor Prices; Diversification Cones;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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