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The lost race against the machine: Automation, education and inequality in an R&D-based growth model

Klaus Prettner () and Holger Strulik ()

No 08-2017, Hohenheim Discussion Papers in Business, Economics and Social Sciences from University of Hohenheim, Faculty of Business, Economics and Social Sciences

Abstract: We analyze the effect of automation on economic growth and inequality in an R&D-based growth model with two types of labor: highskilled labor that is complementary to machines and low-skilled labor that is a substitute for machines. The model predicts that innovationdriven growth leads to increasing automation, an increasing skill premium, an increasing population share of graduates, increasing income and wealth inequality, a declining labor share, and (in an extension of the basic model) increasing unemployment. In contrast to Piketty's famous claim that faster economic growth reduces inequality, our theory predicts that faster economic growth promotes inequality.

Keywords: Automation; R&D-Based Growth; Inequality; Wealth Concentration (search for similar items in EconPapers)
JEL-codes: E23 E25 O31 O33 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fdg, nep-gro, nep-ino and nep-mac
Date: 2017
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