The implications of automation for economic growth when investment decisions are irreversible

Jürgen Antony and Torben Klarl

Economics Letters, 2020, vol. 186, issue C

Abstract: This paper discusses automation embedded into a standard growth model without exogenous growth when investment decisions for physical and automation capital are irreversible. The imposed nonnegativity constraints on physical and automation capital induces an imbalance effect between the growth rate of output and the fraction between physical and automation capital. The paper shows that this imbalance effect leads (i) to transitional dynamics off the steady state while (ii) retaining perpetual growth of the AK style in the steady state without exogenous technological progress. We also show that the resulting transition path does not have to be on the saddle path of the system without the nonnegativity constraints.

Keywords: Automation; Perpetual economic growth; Irreversibility of investment decisions (search for similar items in EconPapers)
JEL-codes: O40 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (15)

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Working Paper: The implications of automation for economic growth when investment decisions are irreversible (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:186:y:2020:i:c:s0165176519303805

DOI: 10.1016/j.econlet.2019.108757

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