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Labor Cost Differentials: Causes and Consequences


Labor costs are often cited as the primary hindrance to economic development in cities where wages are high and as a spur to development in cities where wages are low. The relationship between labor costs and growth is complex, however. Many high-wage cities do experience a decline in growth, but others do not. Similarly, many low-wage cities grow rapidly, but some do not.

Labor costs are often cited as the primary hindrance to economic development in cities where wages are high and as a spur to development in cities where wages are low.The relationship between labor costs and growth is complex, however. Many high-wage cities do experience a decline in growth, but others do not. Similarly, many low-wage cities grow rapidly, but some do not.


Suggested citation: Eberts, Randall W., and Joe A. Stone, 1986. "Labor Cost Differentials: Causes and Consequences," Federal Reserve Bank of Cleveland, Economic Commentary, 12.01.1986.

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