Abstract
Many economists have argued that the observed increase in wage inequality in developed economies over the past 30 years is due to skill‐biased technical progress. In this paper we put forward a somewhat different technology‐based argument, namely that the increased inequality was caused by technical change linked to the pervasive innovation wave associated with the New Economy. This technical change was not skill‐biased in the usual sense, but rather raised the reward to adaptability. This alternative approach based on the notion of ‘general‐purpose technology’ can shed light on a number of outstanding puzzles on the evolution of wage inequality both between and within educational groups.
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