Automation, Automatic Capital Returns, and the Functional Income Distribution

Jose Torres () and Pablo Casas ()

No 2020-02, Working Papers from Universidad de Málaga, Department of Economic Theory, Málaga Economic Theory Research Center

Abstract: This paper studies the economic implications of automation. We consider that automation is affected by disruptive technologies which entail a structural change consisting in the introduction of a new physical capital input (a combination of artifficial intelligence and autonomous robots), additional to ``traditional'' capital assets and labor. This new ``automatic'' physical capital is assumed to carry out production activities without the need to be combined with labor. We propose a simple production function and show that the consequences of automation depend on the combination of the automatic capital adoption rate and the elasticity of substitution between traditional and automatic technology. We find out that, if the adoption rate is below a threshold that matches the marginal productivity of automatic capital, little effects are derived from automation, independently of the elasticity of substitution of the new capital to the traditional capital and labor. However, if the automatic capital adoption rate is above the threshold level and the elasticity of substitution is higher enough, the automation process can lead to a robocalypse scenario with a total shift of both traditional capital and labor. We estimate, through the benchmark calibration of the model, that the adoption rate threshold for automatic capital is about $22.5%$.

Keywords: Automatic capital; Traditional inputs; Automation; Technological change; Income distribution (search for similar items in EconPapers)
JEL-codes: E23 E25 O14 O33 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2020-05
New Economics Papers: this item is included in nep-ino, nep-mac and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Automation, automatic capital returns, and the functional income distribution (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:mal:wpaper:2020-2

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