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CEP discussion paper
Factor Price Equality and the Economies of the United States
Andrew B. Bernard, Stephen J. Redding and Peter K. Schott
July 2005
Paper No' CEPDP0696:
Full Paper (pdf)

JEL Classification: F16; J30; R23; C14

Tags: factor price equality; regional wages; neoclassical trade theory; labor market areas

We develop a methodology for identifying departures from relative factor price equality across regions that is valid under general assumptions about production, markets and factors. Application of this methodology 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 cross section and over time.