Comment

The skill premium and inequality, more generally, have increased dramatically in the United States since 1980; see the top panel of figure 1. This rise has coincided with a substantial increase in the relative supply of skilled workers; see the bottom panel of figure 1. To the extent that relative supply and demand shape relative prices, these patterns reveal a sizable skill-biased shift in relative demand. A large literature across a range of subfields within economics investigates the roles of various economic forces in generating such a shift. This literature emphasizes in particular two broad categories of observable shocks: a fall in the quality-adjusted cost of capital equipment that is relatively more substitutable for less skilled labor (including computers, software, industrial robots, etc.) and demand shocks biased toward jobs that are relatively intensive in skilled labor (induced by international trade, offshoring, structural transformation, etc.). One central goal of this broad literature is to quantify how important each shock is in explaining the evolution of the skill premium andhowmuch remains unexplained (often referred to as “skill-biased technological change”). “Trading Up and the Skill Premium” does a good job of empirically motivating the potential importance of a particular channel that has not featured prominently (or at all) in this literature: a within-industry version of the link between structural transformation and inequality. The authors provide evidence that higher-income consumers disproportionately purchase higher-quality varieties within industries and that higher-quality varieties within industries are skill intensive. This evidence suggests that an increase in incomewill generate a skill-biased demand shock (i.e., an increase in relative expenditure on skill-intensive varieties at fixed prices) within industries. Themain point of our discussion is that this first pass at quantification is missing two key elements. First, the connection between the model