Accounting for Changes in Between-Group Inequality∗

We provide a framework with multiple worker types (e.g. gender, age, education) to decompose changes in aggregated and disaggregated measures of between-group inequality into changes in (i) the composition of the workforce across labor types, (ii) the importance of different tasks, (iii) the extent of computerization, and (iv) other labor-specific productivities (a residual to match observed relative wages). The model features three forms of comparative advantage: between worker types and equipment types, worker types and tasks, and equipment types and tasks. We parameterize the model to match observed changes in worker type allocations (across equipment types and tasks) and wages in the United States between 1984 and 2003. The combination of changes in the importance of tasks and computerization explains more than half of the rise in the skill premium and the rise in inequality across more disaggregated education types as well as almost half the rise in the relative wage of women