GYU-HEE HWANG ∗ - FRANCESCO PASTORE † HOW DOES SKILL INCREASE WITH TECHNOLOGICAL CHANGE? THE UK EXPERIENCE OVER THE 1980s ‡ 1. Introduction Much research on the diffusion of the Information and Telecommu- nications Technology (ICT) emphasises the relevance of changes in knowledge brought about by technological change. The aim of this paper is to show how cognitive skills (CS) actually increase together with technological change. Although many studies have attempted to quantify the skill upgrading brought about by technical change (see, for instance, the monographic issue of the Quarterly Journal of Economics, 1998), the process itself that describes the interaction between technical change and skill upgrading is often disregarded in the literature. The aim of this paper is to explore such a process, as * Department of Economics, Korea University, Korea and Science and Technol- ogy Information Center (STIC)/National Science Council (NSC), Taiwan † GRCSS, University of Sussex, UK, Department of Economic Theory and Ap- plications, University of Naples “Federico II” , Italy, and CELPE, University of Salerno, Italy ‡ Acknowledgements. The applied part of the paper is mainly based on a re- search work carried out by Hwang for his Ph.D. thesis at SPRU, University of Sussex, under the supervision of Prof. Nick Von Tunzelman. He would like to thank his supervisor and examiners: Prof. Ed. Steinmueller at SPRU, University of Sussex, and Prof. Ian Miles at PREST, University of Manchester. The survey of the theoretical literature is based on a research work carried out by Pastore at the Department of Economic Theory and Applications, University of Naples “Federico II”. An early version of the paper (Hwang, 2001b) has bee presented at the International Labor Market (ILM) Conference held in Aberdeen, Scotland, October 1999. Pastore gratefully acknowledges financial support from the Uni- versity of Naples “Federico II” awarded by D.R. n. 4385 the 28th December 2000 within the framework of the “young researchers” support programme for a project on: “How Much Technological Unemployment is Due to Technological Change ?” and the CNR research grant n. G00D3D3. Of course, the usual disclaimer applies. 1