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

Jakub Growiec ()

No 2019-042, Working Papers from Warsaw School of Economics, Collegium of Economic Analysis

Abstract: The article proposes a new conceptual framework for capturing production, R&D, and economic growth in aggregative 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, pre-programmed software, and 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 as well as between robotization and the development of AI. It delivers sharp, 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)
Pages: 31 pages
Date: 2019-02
New Economics Papers: this item is included in nep-big, nep-gro, nep-ict, nep-ino, nep-knm, nep-pay and nep-tid
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Working Paper: The Hardware–Software Model: A New Conceptual Framework of Production, R&D, and Growth with AI (2019) Downloads
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