Title
Testing for Factor Price Equality with Unobserved Differences in Factor Quality or Productivity
Document Type
Article
Publication Date
5-2013
Publication Title
American Economic Journal - Microeconomics
Department
Tuck School of Business
Abstract
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)
DOI
10.1257/mic.5.2.135
Original Citation
Bernard, Andrew B., Stephen J. Redding, and Peter K. Schott. 2013. "Testing for Factor Price Equality with Unobserved Differences in Factor Quality or Productivity." American Economic Journal: Microeconomics, 5 (2): 135-63. DOI: 10.1257/mic.5.2.135
Dartmouth Digital Commons Citation
Bernard, Andrew B.; Redding, Stephen J.; and Schott, Peter K., "Testing for Factor Price Equality with Unobserved Differences in Factor Quality or Productivity" (2013). Dartmouth Scholarship. 2373.
https://digitalcommons.dartmouth.edu/facoa/2373