The lost race against the machine: Automation, education, and inequality in an R&D-based growth model

Arbeitspapier

We analyze the effects of automation and education on economic growth and inequality in an R&D-based growth model with two types of labor: high-skilled labor that is complementary to machines and low-skilled labor that is a substitute for machines. The model predicts that innovation-driven growth leads to increasing automation, an increasing skill premium, an increasing population share of college graduates, increasing income and wealth inequality, and a declining labor share. In contrast to conventional wisdom, our theory predicts that faster economic growth promotes inequality. Because education and technology are endogenous, redistribution to low-skilled individuals may actually not improve disposable low-skilled income, irrespective of whether it is financed by taxes on labor income or machine input in production. We extend the model by fair wage concerns and show how automation implies involuntary low-skilled unemployment.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: cege Discussion Papers ; No. 329

Classification and Topics

• Classification: Wirtschaft ; Macroeconomics: Production ; Aggregate Factor Income Distribution ; Innovation and Invention: Processes and Incentives ; Technological Change: Choices and Consequences; Diffusion Processes ; Economic Growth and Aggregate Productivity: General
• Subject: Automation ; R&D-Based Growth ; Inequality ; Wealth Concentration ; Unemployment ; Redistribution

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Prettner, Klaus ; Strulik, Holger
• Event: Veröffentlichung
• (who): University of Göttingen, Center for European, Governance and Economic Development Research (cege)
• (where): Göttingen
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/171793
• Last update: 13.03.2020, 8:59 AM CET