The Economic Implications of AI-Driven Automation: A Dynamic General Equilibrium Analysis

Aditya Harit

MPRA Paper from University Library of Munich, Germany

Abstract: This paper develops a dynamic general equilibrium (DGE) model to assess the impact of AI-driven automation on labor and capital allocation in an economy. The model considers the endogenous response of firms to task automation and labor substitution, showing how the increasing use of AI affects total output (GDP), wages, and capital returns. By introducing task complementarity and dynamic capital accumulation, the paper explores how automation impacts labor dynamics and capital accumulation. Key results show that while AI enhances productivity and GDP, it can also reduce wages and increase income inequality, with long-run effects that depend on the elasticity of substitution between labor and capital.

Keywords: AI-driven Automation; Dynamic General Equilibrium; Labor Markets; Capital Accumulation; Income Distribution; Technological Change; Task Automation; Economic Inequality; Labor Demand; Capital Returns; Economic Policy; Neoclassical Growth Theory; Labor-Capital Dynamics. (search for similar items in EconPapers)
JEL-codes: A10 A11 C0 C02 E1 E13 E6 E60 J3 J31 J4 J40 N3 P4 P48 (search for similar items in EconPapers)
Date: 2024-10-01
New Economics Papers: this item is included in nep-ain, nep-dge, nep-gro and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/122244/1/MPRA_paper_122244.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:122244

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().