Technology change and rising wage inequality: An explanation from skill-biased technology change hypothesis

This paper argues that the changes of skill-biased technology account for the changes of wage inequality between skilled and unskilled workers as observed in many developed as well as some developing counties over the past decades. It is the increase in the rate of technology change raises the return to skill and simultaneously generates a rise in the wage inequality. After surveying the theoretic and empirical studies of the skill-biased technology change theory, this paper puts forward an analysis model, which explains how skill-biased technology change affects the wage inequality.