Download or read book Investment-specific Technological Change, Skill Accumulation, and Wage Inequality written by and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Wage inequality between education groups in the United States has increased substantially since the early 1980s. The relative quantity of college-educated workers has also increased dramatically in the postwar period. This paper presents a unified framework where the dynamics of both skill accumulation and wage inequality arise as an equilibrium outcome driven by measured investment specific technological change. Working through capital-skill complementarity and endogenous skill accumulation, the model is able to account for much of the observed changes in the relative quantity of skilled workers. The model also does well in replicating the observed rise in wage inequality since the early 1980s. Based on the calibrated model, we examine the quantitative effects of some hypothetical tax-policy reforms on skill formation, inequality, and welfare.