We develop a method for identifying departures from relative factor
price equality that is robust to unobserved variation in factor productivity. We implement this method using data on the relative wage bills of nonproduction and production workers across 170 local
labor markets comprising the continental United States for 1972,
1992, and 2007. We find evidence of statistically significant differences
in relative wages in all three years. These differences increase
in magnitude over time and are related to industry structure in a
manner that is consistent with neoclassical models of production.
(JEL J31, J61, R23)
Bernard, Andrew B., Stephen J. Redding, and Peter K. Schott.
"Testing for Factor Price Equality with Unobserved Differences in Factor Quality or Productivity."
American Economic Journal: Microeconomics,
Wage Level and Structure; Wage Differentials
Geographic Labor Mobility; Immigrant Workers
Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics