The Hardware–Software Model: A New Conceptual Framework of Production, R&D, and Growth with AI

Jakub Growiec

Working Paper series from Rimini Centre for Economic Analysis

Abstract: The article proposes a new conceptual framework for capturing production, R&D, and economic growth in aggregative economic models which extend their horizon into the digital era. Two key factors of production are considered: hardware, including physical labor, traditional physical capital and programmable hardware, and software, encompassing human cognitive work and pre-programmed software, including artificial intelligence (AI). Hardware and software are complementary in production whereas their constituent components are mutually substitutable. The framework generalizes, among others, the standard model of production with capital and labor, models with capital–skill complementarity and skill-biased technical change, and unified growth theories embracing also the pre-industrial period. It offers a clear conceptual distinction between mechanization and automation of production. It delivers sharp, empirically testable and economically intuitive predictions for long-run growth, the evolution of factor shares, and the direction of technical change.

Keywords: production function; R&D equation; technological progress; complementarity; automation; artificial intelligence (search for similar items in EconPapers)
JEL-codes: O30 O40 O41 (search for similar items in EconPapers)
Date: 2019-12
New Economics Papers: this item is included in nep-big, nep-gro, nep-ino, nep-ore, nep-pay and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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http://rcea.org/RePEc/pdf/wp19-18.pdf

Related works:
Working Paper: The Hardware-Software Model: A New Conceptual Framework of Production, R&D, and Growth with AI (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:rim:rimwps:19-18

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