On the evolution of wage inequality in Acemoglu's model of directed technical change

Matthias Weiss

Applied Economics Letters, 2009, vol. 16, issue 6, 591-595

Abstract: In Acemoglu's model of directed technical change, the skill-premium increases in consequence of an increase in the relative supply of skilled labour. In this article, 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 labour is ambiguous. A simulation of Acemoglu's model shows that the growth in the relative supply of skilled labour has led to increased wage inequality in the past, but will lead to decreasing wage inequality in the future.

Date: 2009
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DOI: 10.1080/13504850701206452

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