Should We Fear the Robot Revolution? (The Correct Answer is Yes)

62 Pages Posted: 1 Aug 2018

See all articles by Andrew Berg

Andrew Berg

International Monetary Fund (IMF) - Developing Country Studies Division

Edward F. Buffie

Indiana University Bloomington - Department of Economics

Luis-Felipe Zanna

International Monetary Fund (IMF)

Date Written: May 2018

Abstract

We may be on the cusp of a 'second industrial revolution' based on advances in artificialintelligence and robotics. We analyze the implications for inequality and output, usinga model with two assumptions: 'robot' capital is distinct from traditional capital in itsdegree of substitutability with human labor; and only capitalists and skilled workers save.We analyze a range of variants that reflect widely different views of how automation maytransform the labor market. Our main results are surprisingly robust: automation is goodfor growth and bad for equality; in the benchmark model real wages fall in the short runand eventually rise, but 'eventually' can easily take generations.

Keywords: Production, Technological change, Income distribution, General equilibrium models, robots, growth, Aggregate Factor Income Distribution, General

JEL Classification: E23, E25, O30, O40

Suggested Citation

Berg, Andrew and Buffie, Edward F. and Zanna, Luis-Felipe, Should We Fear the Robot Revolution? (The Correct Answer is Yes) (May 2018). IMF Working Paper No. 18/116. Available at SSRN: https://ssrn.com/abstract=3221174

Andrew Berg (Contact Author)

International Monetary Fund (IMF) - Developing Country Studies Division ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-8843 (Phone)
202-589-8843 (Fax)

Edward F. Buffie

Indiana University Bloomington - Department of Economics ( email )

Wylie Hall 105
107 S. Indiana Avenue
Bloomington, IN 47405-7000
United States
812-855-4848 (Phone)

Luis-Felipe Zanna

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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