Relative Wage Variation and Industry Location in the United Kingdom*


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    This paper is a combination of two previous working papers entitled ‘Factor Price Equalization in the U.K.?’ and ‘Relative Wage Variation and Industry Location’. Redding and Simpson gratefully acknowledge financial support from the ESRC (grant RES000220103). Bernard and Schott gratefully acknowledge financial support from the National Science Foundation (SES-0241474 and SES-0550190). We thank Robert Elliott for supplying us with a SITC-UKSIC concordance. This work contains statistical data from ONS which is Crown copyright and reproduced with the permission of the controller of HMSO and Queen's Printer for Scotland. The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data. This work uses research data sets which may not exactly reproduce National Statistics aggregates. We thank the editors, an anonymous referee, and seminar and conference participants for helpful comments. Any opinions, findings, and conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of the National Science Foundation or any other institution to which the authors are affiliated.


This paper shows that both relative wages and industry structure vary considerably across regions of the United Kingdom. In accordance with the neoclassical model of trade, regions abundant in a factor (i) exhibit lower relative prices of that factor than regions scarce in the factor, and (ii) tend to specialize in a mix of industries intensive in the use of the factor. We show that this specialization leads UK regions to be asymmetrically exposed to external macroeconomic or international trade shocks.