Technological progress, skill accumulation, and wage inequality

In this dissertation I investigate the quantitative importance of embodied technical change as a source of the sharp rise in wage inequality occurred in the U.S. economy in the past 25 years. The essays in this thesis identify a pair of economic mechanisms that, given an acceleration in technological progress, can generate larger wage inequality. The first is the relative complementarity in production between more educated workers and equipment. The second is the way in which the assignment of workers' skills to technologies in a frictional labor market is related to the speed of technical progress. Skill accumulation (through schooling, learning on-the-job, and transferability of knowledge across jobs) plays a central role in the analysis, as it interacts with technical change to shape the rise in inequality. These proposed mechanisms are embodied into rich models of the U.S. economy and are found to be able to replicate qualitatively the four distinctive features of the changes in the wage distribution: (1) an increased educational premium, (2) a rise in wage dispersion within educational groups, (3) a larger individual wage volatility, and (4) a fall in the absolute value of average wage. In the spirit of empirical macroeconomics, I also measure the quantitative relevance of the acceleration of technological progress in accounting for increased inequality. For this purpose, both simulation-based econometric methods and numerical solutions of calibrated artificial economies are used. The key finding is that the contribution of the technological factor to the rise in wage inequality has been of substantial magnitude.