Search Engines vs Steam Engines: The Diﬀerential Eﬀects of New Technologies on Career Choice and Income Inequality Tianxi Wang and Greg C. Wright December 10, 2015 Abstract: This paper considers the implications of two types of technological change for the income distribution within a uniﬁed model in which occupational choice plays a key role. Type A technological change allows unskilled labor to produce a greater quantity of output per unit of time. It increases the return to unskilled labor, but raises the return to human capital by an even larger amount through a general equilibrium eﬀect, thereby increasing inequality. Type B technological change expands the scale of operation for workers within an occupation, such that a given quantity of output generates greater value for the worker. Technological progress of this type is modeled as an increase in the limit over which the production technology of an occupation displays Increasing Returns to Scale. It hurts the least talented workers while possibly beneﬁtting the most talented ones, thus increasing income inequality within the occupation. We compare the theoretical results with U.S. and Chinese data and ﬁnd support for the predictions. JEL: J24, J31, O30, D33 Keywords: income inequality, technological change, increasing returns to scale 1