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...

In this paper, we survey non-competitive theories of training. With competitive labor markets, firms never pay for investments in general training, whereas when labor markets are imperfect, firm-sponsored training arises as an equilibrium phenomenon. We discuss a variety of evidence which...

A central organizing framework of the voluminous recent literature studying changes in the returns to skills and the evolution of earnings inequality is what we refer to as the canonical model, which elegantly and powerfully operationalizes the supply and demand for skills by assuming two...

The majority of labor transactions throughout much of history and a significant fraction of such transactions in many developing countries today are "coercive", in the sense that force or the threat of force plays a central role in convincing workers to accept employment or its terms. We propose...

This paper constructs a tractable general equilibrium model of search with risk-aversion. An increase in risk-aversion reduces wages, unemployment, and investment. Unemployment insurance (UI) has the reverse effect due to market generated moral hazard: insured workers seek high wage jobs with...

I discuss the role of economic theory in empirical work in development economics with special emphasis on general equilibrium and political economy considerations. I argue that economic theory plays (should play) a central role in formulating models, estimates of which can be used for...