This paper studies skill-neutral technological changes in an economy where workers differ with respect to their abilities to acquire skills, implying increasing marginal costs of educating the work force. Our main result is that productivity slowdown and increasing wage dispersion can be obtained without trade or skill-biased technological changes. Moreover, when taking into account institutional changes that have occurred over the latest decades we can generate the time series pattern of wages and productivity in the U.S. and Europe as a responce to neutral technology shocks. Finally, our approach indicates when and why skill-biased technology is likely to be the explanation for the above developments.
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Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number
98-04.
Length: 31 pages + tables Date of creation: Sep 1998 Date of revision: Handle: RePEc:kud:kuiedp:9804
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