The Race between Machine and Man: Implications of Technology for Growth, Factor Shares and Employment

87 Pages Posted: 26 May 2016 Last revised: 21 Jun 2017

Daron Acemoglu

Massachusetts Institute of Technology (MIT) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Pascual Restrepo

Boston University - Department of Economics

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Date Written: June 6, 2017

Abstract

We examine the concerns that new technologies will render labor redundant in a framework in which tasks previously performed by labor can be automated and new versions of existing tasks, in which labor has a comparative advantage, can be created. In a static version where capital is fixed and technology is exogenous, automation reduces employment and the labor share, and may even reduce wages, while the creation of new tasks has the opposite effects. Our full model endogenizes capital accumulation and the direction of research towards automation and the creation of new tasks. If the long-run rental rate of capital relative to the wage is sufficiently low, the long-run equilibrium involves automation of all tasks. Otherwise, there exists a stable balanced growth path in which the two types of innovations go hand-in-hand. Stability is a consequence of the fact that automation reduces the cost of producing using labor, and thus discourages further automation and encourages the creation of new tasks. In an extension with heterogeneous skills, we show that inequality increases during transitions driven both by faster automation and introduction of new tasks, and characterize the conditions under which inequality is increasing or stable in the long run.

Keywords: Automation, Directed Technological Change, Economic Growth, Endogenous Growth, Factor Shares, Productivity, Tasks, Technological Change

JEL Classification: O33, O14, O31, J23, J24

Suggested Citation

Acemoglu, Daron and Restrepo, Pascual, The Race between Machine and Man: Implications of Technology for Growth, Factor Shares and Employment (June 6, 2017). MIT Department of Economics Working Paper No. 16-05. Available at SSRN: https://ssrn.com/abstract=2781320

Daron Acemoglu (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

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National Bureau of Economic Research (NBER)

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Pascual Restrepo

Boston University - Department of Economics ( email )

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