Ability-biased technological transition, wage inequality, and economic growth

This paper develops a growth model characterized by ability-biased technolo gical transition in which the evolution of technology, education attainment , and wage inequality is consistent with the observed pattern in the United States and other advanced countries over the past several decades. It argu es that an increase in the rate of technological progress raises the return to ability and simultaneously generates an increase in wage inequality bet ween and within groups of skilled and unskilled workers, an increase in ave rage wages of skilled workers, a temporary decline in average wages of unsk illed workers, an increase in education, and a productivity transitory slow down.