DP5111 | Factor Price Equality and the Economies of the United States

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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 labour markets in both 1972 and 1992. These deviations vary systematically with labour markets? industry structure both in cross section and over time.