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Technical Change, Inequality, and the Labor Market

  • Daron Acemoglu

This essay discusses the effect of technical change on wage inequality. I argue that the behavior of wages and returns to schooling indicates that technical change has been skill-biased during the past sixty years. Furthermore, the recent increase in inequality is most likely due to an acceleration in skill bias. In contrast to twentieth century developments, most technical change during the nineteenth century appears to be skill-replacing. I suggest that this is because the increased supply of unskilled workers in the English cities made the introduction of these technologies profitable. On the other hand, the twentieth-century has been characterized by skill-biased technical change because the rapid increase in the supply of skilled workers has induced the development of skill-complementary technologies. The recent acceleration in skill bias is in turn likely to have been a response to the acceleration in the supply of skills during the past several decades.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7800.

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Date of creation: Jul 2000
Publication status: published as Acemoglu, Daron. "Technical Change, Inequality, And The Labor Market," Journal of Economic Literature, 2002, v40(1,Mar), 7-72.
Handle: RePEc:nbr:nberwo:7800
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