Working Paper: NBER ID: w8769
Authors: David Card; John E. DiNardo
Abstract: The rise in wage inequality in the U.S. labor market during the 1980s is usually attributed to skill-biased technical change (SBTC), associated with the development of personal computers and related information technologies. We review the evidence in favor of this hypothesis, focusing on the implications of SBTC for economy-wide trends in wage inequality, and for the evolution of wage differentials between various groups. A fundamental problem for the SBTC hypothesis is that wage inequality stabilized in the 1990s, despite continuing advances in computer technology. SBTC also fails to explain the closing of the gender gap, the stability of the racial wage gap, and the dramatic rise in education-related wage gaps for younger versus older workers. We conclude that the SBTC hypothesis is not very helpful in understanding the myriad shifts in the structure of wages that have occurred over the past three decades.
Keywords: Skill-Biased Technological Change; Wage Inequality; Labor Market
JEL Codes: J31; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| skill-biased technological change (SBTC) (J24) | wage inequality (J31) |
| introduction of personal computers (L63) | demand for skilled labor (J24) |
| demand for skilled labor (J24) | increased earnings for skilled workers (J24) |
| skill-biased technological change (SBTC) (J24) | stabilization of wage inequality in the 1990s (F66) |
| skill-biased technological change (SBTC) (J24) | closing of the gender wage gap (J79) |
| skill-biased technological change (SBTC) (J24) | closing of the racial wage gap (J79) |
| skill-biased technological change (SBTC) (J24) | education-related wage gaps between younger and older workers (J39) |