the 20th century skill-bias of technological change leads researchers to ask why recent technological change has taken the form it has Acemoglu’s answer is that, at least in part, the character of technological change itself constitutes a response to profit incentives: “…the early nineteenth century was characterized b y skill-replacing developments because the increased supply of unskilled workers in the English cities (resulting from migration from rural areas and from Ireland) made the introduction of these technologies profitable In contrast, the twentieth century has been characterized by skill-biased technical change because the rapid increase in the supply of skilled workers has induced the development of skill-complementary technologies (p 9)” In general, technological change in this model is endogenous—that is, its character is shaped by any incentives that firms face Of course, an increase in the supply of skilled labor, as has been occurring relentlessly in the U.S over the past century, would, other things unchanged, lead to a fall in the wage premium Acemoglu and others argue that the increase in the demand for skilled labor has simply outpaced the increase in supply But this also begs the why question Acemoglu’s answer again relies on the profit motive: “…the development of skill-biased technologies will be more profitable when they have a larger market size—i.e., when there are more skilled workers Therefore, the equilibrium degree of Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 664