This paper explores the relationship between new technologies and skills, focusing on how these technologies complement skilled labor. The author, Daron Acemoglu, argues that the rate of improvement of technologies is determined by a profit-maximizing R&D sector. When there is a high proportion of skilled workers, the market for skill-complementary technologies becomes larger, leading to increased investment in upgrading the productivity of skilled workers. This suggests that an increase in the relative supply of skilled workers can initially decrease the skill premium but then increase it, possibly above its initial value, due to the change in the direction of technical change. The paper provides an alternative explanation for the changes in wage inequality in the U.S. over the past two decades, suggesting that the rapid increase in the proportion of college graduates may have been causal in both the decline of the college premium during the 1970s and the large increase in inequality during the 1980s. The analysis also applies to other episodes of skill supply increases, such as the high school premium decline in the 1910s, and discusses the implications for international trade and wage inequality. The paper concludes by suggesting that the model's predictions are consistent with the observed trends in the U.S. economy.This paper explores the relationship between new technologies and skills, focusing on how these technologies complement skilled labor. The author, Daron Acemoglu, argues that the rate of improvement of technologies is determined by a profit-maximizing R&D sector. When there is a high proportion of skilled workers, the market for skill-complementary technologies becomes larger, leading to increased investment in upgrading the productivity of skilled workers. This suggests that an increase in the relative supply of skilled workers can initially decrease the skill premium but then increase it, possibly above its initial value, due to the change in the direction of technical change. The paper provides an alternative explanation for the changes in wage inequality in the U.S. over the past two decades, suggesting that the rapid increase in the proportion of college graduates may have been causal in both the decline of the college premium during the 1970s and the large increase in inequality during the 1980s. The analysis also applies to other episodes of skill supply increases, such as the high school premium decline in the 1910s, and discusses the implications for international trade and wage inequality. The paper concludes by suggesting that the model's predictions are consistent with the observed trends in the U.S. economy.