This project will analyze the relationship between technological progress, earnings inequality, the transmission of inequality across generations, and economic growth. The research will assert that the interplay between technological progress and several components that determine individual earnings - specific and general human capital and individual ability - governs the evolutionary pattern of wage inequality, intergenerational earnings mobility, the pace of technological progress, and economic growth The research will demonstrate that in periods of major technological inventions individual ability is the dominating factor and earnings inequality rises. The decline in the relative importance of acquired initial conditions (i.e., the driving force behind the persistence of inequality) enhances mobility and generates a larger concentration of individuals with high levels of ability and human capital in technologically advanced sectors, stimulating further technological progress and future economic growth. Once existing technologies become more accessible, the specific human capital is the dominating factor, mobility is diminished and inequality declines but becomes more persistent. The reduction in the concentration of human capital in technologically advanced sectors diminishes the likelihood of major technological breakthroughs and slows down future economic growth. User friendliness, therefore, becomes unfriendly to future economic growth. The research will explore an unexamined relationship between technological progress and earnings inequality. It will suggest that the life cycle of technology governs the evolution of earnings inequality. Initially, inventions increase the return to skills, but as technology becomes more accessible the return to skills declines. In addition, the research will contribute to the literature on income distribution and growth, and technological progress and economic growth. It will explore a novel technological link in the relationship between inequality and economic growth, demonstrating the role of inequality in the determination of output growth via its effect on mobility, the allocation of talents across occupations, and the frequency of technological breakthroughs. Furthermore, the research will examine the role of technological progress in allocating high-ability individuals into technologically advanced sectors in which growth-enhancing technologies are developed.
