There is substantial inequality of wage levels between regions within the U.S. for example, wages of manufacturing workders in equivalent jobs are about 20 percent lower in the Southeast than they are in the Far West. Which of the explanations of failure of factor price equalization might account for this?How is this case different from the divergence of wages between teh United State and Mexico (which is geographically closer to both the U.S. Southeast and the Far West are to each other)?
Answer:
Wages are higher in areas with higher costs for people. So if rent etc. is more expensive, people need more to live.
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