Automation, New Technology and Non-Homothetic Preferences

18 Pages Posted: 18 Jun 2019 Last revised: 26 Jun 2019

See all articles by Clemens Struck

Clemens Struck

University College Dublin

Adnan Velic

Technological University Dublin

Date Written: June 8, 2019

Abstract

To rationalize a substantial income share of labor despite progressive task automation over the centuries, we present a simple model in which demand moves along a vertically differentiated production structure toward goods of increasing sophistication. Automation of more sophisticated goods requires capital of increasing quality. Quality capital remains scarce along the growth path. This is why labor keeps up a substantial fraction of income. Real capital, however, that is capital measured in units of the quality of some base year, becomes abundant relative to labor. While our model features an entirely different mechanism, we show that its aggregate representation is the one of a neoclassical growth model with labor-augmenting technical change.

Keywords: Uzawa’s theorem, automation, goods quality, structural change, reallocations, growth, non-homothetic preferences, hierarchical demand

JEL Classification: E23, E24, E25, J23, J24, O14, O31, O33

Suggested Citation

Struck, Clemens and Velic, Adnan, Automation, New Technology and Non-Homothetic Preferences (June 8, 2019). Available at SSRN: https://ssrn.com/abstract=3401293 or http://dx.doi.org/10.2139/ssrn.3401293

Clemens Struck (Contact Author)

University College Dublin ( email )

School of Economics
Belfield, Dublin 4
Ireland

HOME PAGE: http://ccstruck.weebly.com

Adnan Velic

Technological University Dublin ( email )

Dublin
Ireland

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