Techonolgical Change and the Income Distribution: Theory and Some Evidence

This paper considers two types of technological change in a unified model. Typ A is unskilled-biased, allowing workers to cheaply produce more. This hurts the least talented workers while possibly benefitting the most talented ones. Together, these technological changes may have contributed to the continuous rise in income inequiality that developed economies have witnessed in recent decades. The paper compares the theoretical results with US data and finds support for the predictions.