# **Table 5: PPP wage ratios for urban males between continental US and Puerto Rico, and between US states**

|Sample|Pooled|Pool|ed|Pooled|Bilateral|Bilateral|
|---|---|---|---|---|---|---|
|Specification|Mincer|Minc|er|Category|Category|Category|
|Years of education|9|9||9-12|9-12|9-12|
|Age|35|35||35-39|35-39|35-39|
|State-specific educ.?|N|Y||N|Y|Y|
|Comparison|||||US-born|PR-born|
|**Puerto Rico**|**1.51**||**1.31**|**1.56**|**1.75**|**1.50**|
|_48 US States, base gro_|_up New York_||||||
|Average|0.97||0.87|0.97|||
|Median|0.95||0.86|0.96|||
|Standard deviation|0.08||0.08|0.07|||
|Maximum|1.15||1.02|1.15|||
|Minimum|0.84||0.74|0.85|||
|**Max./Min.**|**1.37**||**1.37**|**1.35**|||

The maximum states are North Dakota (cols. 1 & 3) and Rhode Island (col. 2); the minimum states are Texas (cols. 1 & 3) and Mississippi (col. 2). “Basic” means standard Mincer specification with linear education term and linear + quadratic age terms. “Category” means dummies for five education levels and nine age levels. “State-spec ed” means the education terms are allowed to differ in each state. The Berry, Fording, and Hanson (2000) US state cost-of-living index does not include estimates for Alaska, Hawaii, or the District of Columbia, so no comparable PPP wages can be calculated for those. New York is the base group in the regressions. “US born” column is the ratio of wages for US-born, US residents to those Puerto Rico-born Puerto Rico residents. The “PR born” column shows the ratio of wages for Puerto Rico-born US residents to Puerto Rico-born Puerto Rico residents. Sample is roughly 1.6 million people, all regressions weighted with sampling weights.

What portion of the ratios in Table 2 can be explained by natural costs δ _n_ ? We approach this question by estimating equation (1) in settings where there are few legal barriers to movement, so that δ _p_ ≈ 0 : migration within countries, and movement from Puerto Rico and Micronesia to the United States.

Table 5 presents estimates of _R_<sup>ˆ</sup> _o_ and _R_<sup>~</sup> _o_ for workers in New York to those in 47 other continental US states and Puerto Rico, using regressions similarly structured to those underlying Table 2.<sup>20</sup> The earnings of observably identical workers across US states differ by a ratio of 1.35-1.37 at the extremes, which is not surprising given the spatially integrated labor market.

The earnings of workers born in Puerto Rico but residing in New York state are about 1.5 times the earnings of observably identical residents of Puerto Rico born in Puerto Rico. This ratio combines the effect of natural barriers δ _n_ and any bias to the ratio (2) from

> 20 Dollar wages in Puerto Rico are converted to “mainland PPP” dollars by dividing by the PPP factor 0.86 from Heston, Summers, and Aten (2006). The census data do not contain year of arrival on the mainland for people born in Puerto Rico, so for these regressions we combine “early” and “late” arrivals in (6) into a single category. Dollar wages in each of the US states are standardized for purchasing power based on the state cost-of-living estimates by Berry, Fording, and Hanson (2000). Only 48 states are estimated because the cost-of-living estimates used to standardize wages by purchasing power are missing for Alaska and Hawaii (and the District of Columbia). The state of New York is used as the base group.

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