A Methodology for Estimating Returns to Skills for Canadian Provinces and U.S. States

Differences in both regional skill prices and skill mix can explain interregional variations in wage distributions. We control for interregional differences in skill mix that permit us to compute key parameters of regional wage distributions including regional returns to skills. In addition to setting forth the methods in detail, we also present estimates for 48 U.S. states and 10 Canadian provinces. For both males and females, we find that regional mean wages (with controls for skills mix) in the U.S. and Canada are similar, but that the returns to skills are systematically higher in the U.S.