On the Evolution of Wage Inequality in Acemoglu’s Model of Directed Technical Change

Matthias Weiss

No 5099, MEA discussion paper series from Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy

Abstract: In Acemoglu's model of directed technical change (1998 in this Journal), the skill-premium increases in consequence of an increase in the relative supply of skilled labor. In this paper, I argue that other measures of wage inequality such as the Gini-coefficient do not necessarily rise as well. The Gini-coefficient depends positively on the skill-premium but the effect of an increase in the relative supply of skilled labor is ambiguous. A simulation of Acemoglu's model shows that the growth in the relative supply of skilled labor has led to increased wage inequality in the past but will lead to decreasing wage inequality in the future.

JEL-codes: J31 O33 (search for similar items in EconPapers)
Date: 2005-09-14
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Citations: View citations in EconPapers (1)

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