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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Ludwig, Sandra / Schmitz, Hendrik

Ed. by Auriol, Emmanuelle / Barigozzi, Francesca / Brunner, Johann / Fleck, Robert / Mastrobuoni, Giovanni / Mendola, Mariapia / Requate, Till / de Vries, Frans / Wenzel, Tobias / Zulehner, Christine

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Volume 5, Issue 1


Volume 6 (2006)

Volume 4 (2004)

Volume 2 (2002)

Volume 1 (2001)

Do Local Relative Factor Supplies Affect Local Relative Factor Prices?

Joelle Saad-Lessler
Published Online: 2005-09-24 | DOI: https://doi.org/10.1515/1538-0653.1222


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.

This article offers supplementary material which is provided at the end of the article.

Keywords: Immigration; Relative Factor Price Equalization

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Published Online: 2005-09-24

Citation Information: The B.E. Journal of Economic Analysis & Policy, Volume 5, Issue 1, ISSN (Online) 1935-1682, ISSN (Print) 2194-6108, DOI: https://doi.org/10.1515/1538-0653.1222.

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