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Do Local Relative Factor Supplies Affect Local Relative Factor Prices?

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  • Saad-Lessler Joelle

    (Long Island University, jsaad@liu.edu)

Abstract

This paper examines whether local relative factor supplies affect local relative factor prices across US states. Using data on relative wages and relative labor supplies across the US, I find that state specific relative labor supplies significantly impact state specific relative wages across the US. Moreover, in an effort to reconcile my finding with that of Hanson and Slaughter (2000), I rerun their model and I prove that their interpretation is incorrect, and that in fact, differences in relative labor supplies across states determine relative wages and industry production techniques.These findings suggest that relative FPE does not hold across US states. In addition, the findings imply that immigration shocks to US states have a significant effect on relative wages, holding all else equal, as long as the immigrant inflows significantly impact states’ relative labor supplies.

Suggested Citation

  • Saad-Lessler Joelle, 2005. "Do Local Relative Factor Supplies Affect Local Relative Factor Prices?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-34, September.
    • Handle: RePEc:bpj:bejeap:v:topics.5:y:2005:i:1:n:19
    DOI: 10.1515/1538-0653.1222
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    Cited by:

    1. Lafortune, Jeanne & Tessada, José & González-Velosa, Carolina, 2015. "More hands, more power? Estimating the impact of immigration on output and technology choices using early 20th century US agriculture," Journal of International Economics, Elsevier, vol. 97(2), pages 339-358.

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