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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.
Massachusetts Institute of Technology
Publication date: March 1, 2002
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The Journal of Economic Literature (JEL) began publication in 1969 under the auspices of the American Economic Association with quarterly issues appearing in March, June, September, and December. JEL contains survey and review articles, book reviews, an annotated bibliography of newly published books, and a list of current dissertations in North American universities.