Abstract
This article contributes to the debate on skill-biased technical change by studying the dynamics of skill supply and wage inequality in an endogenous growth model with ability-biased technical progress. Due to a discouragement effect, rising within groups inequality reduces incentives to become educated for ordinary-ability workers. This mechanism generates a non-monotonic relationship between the growth rate and skill supply driving wage inequality upward during periods of accelerating technical change. This theoretical explanation is consistent with the apparent ambiguous relationship between the relative skill supply and inequality in the last decades in several OECD countries.
| Original language | English |
|---|---|
| Pages (from-to) | 812-830 |
| Number of pages | 19 |
| Journal | Labour Economics |
| Volume | 15 |
| Issue number | 5 |
| DOIs | |
| Publication status | Published - 1 Oct 2008 |
Keywords
- Biased Technical Change
- Innovation-Driven Growth
- Skill Supply
- Wage Inequality
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