Automation, growth, and factor shares in the era of population aging

Andreas Irmen

Journal of Economic Growth, 2021, vol. 26, issue 4, No 3, 415-453

Abstract: Abstract How does population aging affect economic growth and factor shares in times of increasingly automatable production processes? The present paper addresses this question in a new macroeconomic model of automation where competitive firms perform tasks to produce output. Tasks require labor and machines as inputs. New machines embody superior technological knowledge and substitute for labor in the performance of tasks. Automation is labor-augmenting in the reduced-form aggregate production function. If wages increase then the incentive to automate becomes stronger. Moreover, the labor share declines even though the aggregate production function is Cobb–Douglas. Population aging due to a higher longevity reduces automation in the short and promotes it in the long run. It boosts the growth rate of absolute and per-capita GDP in the short and the long run, lifts the labor share in the short and reduces it in the long run. Population aging due to a decline in fertility increases automation, reduces the growth rate of GDP, and lowers the labor share in the short and the long run. In the short run, it may or may not increase the growth rate of per-capita GDP, in the long run it unequivocally accelerates per-capita GDP growth.

Keywords: Population aging; Automation; Factor shares; Endogenous technical change; Endogenous labor supply (search for similar items in EconPapers)
JEL-codes: E22 J11 J22 J23 O33 O41 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://link.springer.com/10.1007/s10887-021-09195-w Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Automation, Growth, and Factor Shares in the Era of Population Aging (2021)
Working Paper: Automation, Growth, an Factor Shares in the Era of Population Aging (2020)
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:kap:jecgro:v:26:y:2021:i:4:d:10.1007_s10887-021-09195-w

Ordering information: This journal article can be ordered from
http://www.springer. ... th/journal/10887/PS2

DOI: 10.1007/s10887-021-09195-w

Access Statistics for this article

Journal of Economic Growth is currently edited by Oded Galor

More articles in Journal of Economic Growth from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().