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Factor Price Equalization in the UK?

  • 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)

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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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
Contact details of provider: Web page: http://icf.som.yale.edu/

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  11. Machin, Stephen, 1996. "Wage Inequality in the UK," Oxford Review of Economic Policy, Oxford University Press, vol. 12(1), pages 47-64, Spring.
  12. Bernstein, Jeffrey R. & Weinstein, David E., 2002. "Do endowments predict the location of production?: Evidence from national and international data," Journal of International Economics, Elsevier, vol. 56(1), pages 55-76, January.
  13. Gordon H. Hanson, 1998. "Market Potential, Increasing Returns, and Geographic Concentration," NBER Working Papers 6429, National Bureau of Economic Research, Inc.
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  19. Cameron, Gavin & Muellbauer, John, 2000. "Earnings Biases in the United Kingdom Regional Accounts: Some Economic Policy and Research Implications," Economic Journal, Royal Economic Society, vol. 110(464), pages F412-29, June.
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  22. Hughes, Gordon & McCormick, Barry, 1994. "Did Migration in the 1980s Narrow the North-South Divide?," Economica, London School of Economics and Political Science, vol. 61(244), pages 509-27, November.
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  25. Steve Machin & Amanda Gosling, 1994. "What happened to the wages of men since the mid-1960s," Fiscal Studies, Institute for Fiscal Studies, vol. 15(4), pages 63-87, November.
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  28. 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.
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