Trade, location, and wages in the United States

This paper estimates a spatial wage structure for the United States. I employ the market access and supplier access method of Redding and Venables [Redding, S., Venables, A. J., 2004, Economic geography and international inequality. Journal of International Economics 62, 53–82.], where access is determined using the interstate trade data. Economic geography models predict that state-level wages are correlated to this measure, owing to higher levels of demand and better availability of intermediate goods in easily accessible regions. After correcting for omitted-variable bias with exogenous ‘first nature’ regressors and using the appropriate instruments, I find that the explanatory power of access-variables is weak in this dataset.