Consider an economy consisting of two sectors – service and manufacturing. Assume that the wage rates are initially equal across the two sectors. Suppose that a technological revolution takes place in the service sector. Illustrate and explain what happens to the real wage rate in each sector. Suppose that workers can move from one sector to the other when they improve the required skills over time. Illustrate and explain what happens to the real wage rate and employment in each sector as workers from one sector to the other.

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