Structural change and the skill premium

•Structural change increases the skill premium if the sector absorbing more labor is skill-intensive and decreases the skill premium otherwise.•Capital deepening and sectoral productivity growth may change the skill premium by driving structural change.•Variations in the skill premium along the process of structural change depend on sectoral differences in factor-augmenting technologies, capital-labor substitutability and factor intensity.•Within-sector labor-augmenting technological change significantly influences the skill premium through the mechanism of structural change in the U.S. economy.