Economic growth and convergence during the transition to production using automation capital

Martin Lábaj and Daniel Dujava

No 17, Department of Economic Policy Working Paper Series from Department of Economic Policy, Faculty of National Economy, University of Economics in Bratislava

Abstract: This paper examines the implications of automation capital in a Solow growth model withtwo types of labour. We study the transition from standard production to production usingautomation capital which substitutes low-skilled workers. We assume that despite advancesin technology, AI and machine learning, certain tasks can be performed only by high-skilledlabour and are not automatable. We show that under these assumptions, automation capitaldoes not generate endogenous growth without technological progress. However, assumingpresence of technological progress augmenting both effective number of workers and effectivenumber of industrial robots, automation increases rate of long-run growth. We analyse asituation in which some countries do not use robots at all and other group of countries startsthe transition to the economy where industrial robots replace low-skilled labour. We showthat this has potential non-linear effects on?-convergence and that the model is consistentwith temporary divergence of incomes per capita. We derive a set of estimable equationsthat allows us to test the hypotheses in a Mankiw-Romer-Weil framework.

Keywords: Automation; Economic growth; Income inequality; Convergence; Robots (search for similar items in EconPapers)
JEL-codes: D63 E25 O11 O41 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2019
New Economics Papers: this item is included in nep-big, nep-gro, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:brt:depwps:017

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