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Regional Wage Convergence and Divergence: Adjusting Wages for Cost-of-Living Differences



An examination of the divergence of U.S. regional fortunes in the early 1980s, showing that once regional prices are factored in, relative wage rates continue to converge across regions. The trend in regional wage variation is also shown to be attributable to declining differences in labor market valuations of worker attributes, rather than to shifts in the regional composition of the workforce.
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Suggested Citation

  • Randall W. Eberts & Mark E. Schweitzer, "undated". "Regional Wage Convergence and Divergence: Adjusting Wages for Cost-of-Living Differences," Upjohn Working Papers and Journal Articles rwe1994er2, W.E. Upjohn Institute for Employment Research.
  • Handle: RePEc:upj:weupjo:rwe1994er2
    Note: Appears in Economic Review: Federal Reserve Bank of Cleveland 30(2): 26-37

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    References listed on IDEAS

    1. Lynn E. Browne, 1989. "Shifting regional fortunes: the wheel turns," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 27-40.
    2. Giora Hanoch, 1967. "An Economic Analysis of Earnings and Schooling," Journal of Human Resources, University of Wisconsin Press, vol. 2(3), pages 310-329.
    3. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-1278, December.
    4. Stuart A. Gabriel & Janice Shack-Marquez & William L. Wascher, 1988. "Regional labor markets, cost-of-living differentials, and migration," Working Paper Series / Economic Activity Section 91, Board of Governors of the Federal Reserve System (U.S.).
    5. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
    6. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
    7. Farber, Stephen C & Newman, Robert J, 1987. "Accounting for South/Non-South Real Wage Differentials and for Changes in Those Differentials over Time," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 215-223, May.
    8. Mark E. Schweitzer, 1993. "Accounting for earnings inequality in a diverse work force," Working Paper 9314, Federal Reserve Bank of Cleveland.
    9. Gerking, Shelby D & Weirick, William N, 1983. "Compensating Differences and Interregional Wage Differentials," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 483-487, August.
    10. Randall W. Eberts, 1989. "Accounting for the recent divergence in regional wage differentials," Economic Review, Federal Reserve Bank of Cleveland, issue Q III, pages 14-26.
    11. Sahling, Leonard G & Smith, Sharon P, 1983. "Regional Wage Differentials: Has the South Risen Again?," The Review of Economics and Statistics, MIT Press, vol. 65(1), pages 131-135, February.
    12. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-442, June.
    13. Bellante, Don, 1979. "The North-South Differential and the Migration of Heterogeneous Labor," American Economic Review, American Economic Association, vol. 69(1), pages 166-175, March.
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    Cited by:

    1. Michael Beenstock & Daniel Felsenstein, 2003. "Decomposing the Dynamics of Regional Earnings Disparities in Israel," ERSA conference papers ersa03p90, European Regional Science Association.
    2. George Hammond & Eric Thompson, 2002. "Mobility and Modality Trends in US State Personal Income," Regional Studies, Taylor & Francis Journals, vol. 36(4), pages 375-387.
    3. Carolyn Sherwood-Call, 1996. "The 1980s divergence in state per capital incomes: what does it tell us?," Economic Review, Federal Reserve Bank of San Francisco, pages 14-25.
    4. Todd Easton & Mary King, 2000. "Differences in Wage Levels Among Metropolitan Areas: Less-educated Workers in the United States," Regional Studies, Taylor & Francis Journals, vol. 34(1), pages 21-27.
    5. Easton, Todd, 2001. "Immigration and Natives' Wages: Understanding Their Correlation in the 1980s," The Review of Regional Studies, Southern Regional Science Association, vol. 31(3), pages 219-235, Winter.
    6. Fousekis, Panos, 2007. "Convergence of Relative State-level Per Capita Incomes in the United States Revisited," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 37(2).

    More about this item


    wage differential; cost-of-living; regional issues;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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