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Skill Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles

  • David Card
  • John E. DiNardo

The rise in wage inequality in the U.S. labor market during the 1980s is usually attributed to skill-biased technical change (SBTC), associated with the development of personal computers and related information technologies. We review the evidence in favor of this hypothesis, focusing on the implications of SBTC for economy-wide trends in wage inequality, and for the evolution of wage differentials between various groups. A fundamental problem for the SBTC hypothesis is that wage inequality stabilized in the 1990s, despite continuing advances in computer technology. SBTC also fails to explain the closing of the gender gap, the stability of the racial wage gap, and the dramatic rise in education-related wage gaps for younger versus older workers. We conclude that the SBTC hypothesis is not very helpful in understanding the myriad shifts in the structure of wages that have occurred over the past three decades.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8769.

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Date of creation: Feb 2002
Date of revision:
Publication status: published as Card, David and John E. DiNardo. "Skill-Based Technological Change And Rising Wage Inequality: Some Problems And Puzzles," Journal of Labor Economics, 2002, v20(4,Oct), 733-783.
Handle: RePEc:nbr:nberwo:8769
Note: LS
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