A general purpose technology explains the Solow paradox and wage inequality

We analyze the consequences of a general purpose technology (GPT) on output, productivity, and wages of skilled and unskilled workers. Our endogenous growth model matches three key empirical facts during the 1980s and 1990s: an increasing skill premium, a fall in the real wages of unskilled workers and a slowing down of economic growth after the introduction of a GPT.