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Relative wages vary considerably across regions of the United Kingdom, with skill-abundant regions exhibiting lower skill premia than skill-scarce regions. This paper shows that the location of economic activity is correlated with the variation in relative wages. U.K. regions with low skill premia produce different sets of manufacturing industries than regions with high skill premia. Relative wages are also linked to subsequent economic development: over time, increases in the employment share of skill-intensive industries are greater in regions with lower initial skill premia. Both results suggest firms adjust production across and within regions in response to relative wage differences.
Authors
Stephen Redding
Helen Simpson
Dartmouth University
Andrew is the Jack Byrne Professor of International Economics at the Tuck School of Business at Dartmouth and an International fellow of IFS. His research interests include international trade and investment and he specializes in firm responses to globalization.
Yale University
Peter is an Associate Professor of Economics at the Yale School of Management and an International Fellow of IFS.
Working Paper details
- DOI
- 10.1920/wp.ifs.2003.0317
- Publisher
- IFS
Suggested citation
Bernard, A et al. (2003). Relative wage variation and industry location. London: IFS. Available at: https://ifs.org.uk/publications/relative-wage-variation-and-industry-location-0 (accessed: 20 May 2024).
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