Abstract: Rising inequality in the relative wages of skilled and
unskilled labor is often attributed to skill-biased
technological progress. This paper presents a model in
which the adoption of skill-biased or "unskilled-biased"
technologies is endogenous. Conventional wisdom states that
an increase in the supply of skilled labor lowers the
relative wage of skilled to unskilled labor. In this paper,
an increase in the supply of skilled labor leads to
temporary stagnation in the wages of unskilled workers and
an expanding gap between the wages of skilled and unskilled
workers through an acceleration of skill-biased
technological change.
Keywords: Wage inequality, endogenous growth
Full paper (44 KB PDF)
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Last update: October 10, 1997
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