Machines as Engines of Growth

Joseph Zeira

No 5429, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper builds a model of growth through industrialization, as machines replace workers in a growing number of tasks. This enables the economy to experience long-run growth, as machines become servants of humans, and as their number can grow unboundedly. The mechanism that drives growth is the feedback between industrialization and wages. High wages are incentives to use machines and industrialize, while industrialization raises wages. The model shows that industrialization and growth take off only if the economy is productive enough. It also shows that monopoly power can stifle growth, as it lowers wages. Hence, a one-time increase in productivity, or a reduction of monopoly power can push economies from stagnation to industrialization.

Keywords: Economic growth; Industrialization; Technology (search for similar items in EconPapers)
JEL-codes: O14 O30 O40 (search for similar items in EconPapers)
Date: 2005-12
New Economics Papers: this item is included in nep-dev and nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Working Paper: Machines as Engines of Growth (2006)
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