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Psychic Costs and Factor Price Equalization

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  • Morgan, Larry C.
  • Deaton, Brady J.

Abstract

There has been some perplexity among economists over the failure of interregional wage differentials to approach zero over time in an economy characterized by labor mobility. Johnson [7], and Sjaastad [14], among others, have hypothesized declining wage differentials among regions and have puzzled over contrary empirical results. It has generally been assumed that labor will flow toward regions paying the highest wage rate. This equilibrating framework has dominated economic thought on this problem area and has directed research along narrow market-oriented lines. The hypothesis of this paper is that nonmarket considerations, specifically psychic costs, are a major force in preventing a market-directed flow of human resources. Moreover, “nonoptimal” allocation of human resources results from differences in workers' perceptions of utility between various regions.

Suggested Citation

  • Morgan, Larry C. & Deaton, Brady J., 1975. "Psychic Costs and Factor Price Equalization," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 7(1), pages 233-238, July.
    • Handle: RePEc:cup:jagaec:v:7:y:1975:i:01:p:233-238_01
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    Cited by:

    1. Deaton, Brady J. & Nelson, Glenn L., 1992. "Conceptual Underpinnings Of Policy Analysis For Rural Development," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 24(1), pages 1-13, July.
    2. Perkinson, Leon B. & Hoover, Dale M., 1977. "Tobacco Mechanization And Potential Out-Migration," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 9(1), pages 1-6, July.
    3. Redman, Barbara J., 1980. "Rural Development: A Critique," 1980 Annual Meeting, July 27-30, Urbana-Champaign, Illinois 278482, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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