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Psychic Costs and Factor Price Equalization

Published online by Cambridge University Press:  28 April 2015

Larry C. Morgan  and
Brady J. Deaton
Larry C. Morgan
Affiliation:
Department of Agricultural Economics and Rural Sociology, University of Tennessee, Knoxville
Brady J. Deaton
Affiliation:
Department of Agricultural Economics and Rural Sociology, University of Tennessee, Knoxville
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Extract

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.

Type
Research Article
Information
Journal of Agricultural and Applied Economics , Volume 7 , Issue 1 , July 1975 , pp. 233 - 238
Copyright
Copyright © Southern Agricultural Economics Association 1975

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References

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