Technical Change, Inequality, and the Labor Market
Journal of Economic Literature
vol. 40,
no. 1, March 2002
(pp. 7-72)
Abstract
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, much of the technical change during the early 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.Citation
Acemoglu, Daron. 2002. "Technical Change, Inequality, and the Labor Market." Journal of Economic Literature, 40 (1): 7-72. DOI: 10.1257/0022051026976JEL Classification
- O33 Technological Change: Choices and Consequences; Diffusion Processes
- J31 Wage Level and Structure; Wage Differentials
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity