Journal Article

Wage Inequality and the New Economy

Philippe Aghion and Peter Howitt

in Oxford Review of Economic Policy

Published on behalf of The Oxford Review of Economic Policy Ltd

Volume 18, issue 3, pages 306-323
Published in print September 2002 | ISSN: 0266-903X
Published online September 2002 | e-ISSN: 1460-2121 | DOI: http://dx.doi.org/10.1093/oxrep/18.3.306
Wage Inequality and the New Economy

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  • Economic Development and Growth
  • Public Economics
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Many economists have argued that the observed increase in wage inequality in developed economies over the past 30 years is due to skill‐biased technical progress. In this paper we put forward a somewhat different technology‐based argument, namely that the increased inequality was caused by technical change linked to the pervasive innovation wave associated with the New Economy. This technical change was not skill‐biased in the usual sense, but rather raised the reward to adaptability. This alternative approach based on the notion of ‘general‐purpose technology’ can shed light on a number of outstanding puzzles on the evolution of wage inequality both between and within educational groups.

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Subjects: Economic Development and Growth ; Public Economics ; Political Economy ; Public Policy

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