Uneven Growth: Automation&Apos;S Impact on Income and Wealth Inequality

47 Pages Posted: 8 Feb 2021 Last revised: 18 Mar 2021

See all articles by Benjamin Moll

Benjamin Moll

Princeton University - Department of Economics

Lukasz Rachel

Bank of England

Pascual Restrepo

Boston University - Department of Economics

Date Written: February 2021

Abstract

The benefits of new technologies accrue not only to high-skilled labor but also to owners of capital in the form of higher capital incomes. This increases inequality. To make this argument, we develop a tractable theory that links technology to the personal income and wealth distributions – and not just that of wages – and use it to study the distributional effects of automation. We isolate a new theoretical mechanism: automation increases inequality via returns to wealth. The flip side of such return movements is that automation is more likely to lead to stagnant wages and therefore stagnant incomes at the bottom of the distribution. We use a multi-asset model extension to confront differing empirical trends in returns to productive and safe assets and show that the relevant return measures have increased over time. Automation accounts for part of the observed trends in income and wealth inequality and macroeconomic aggregates.

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Suggested Citation

Moll, Benjamin and Rachel, Lukasz and Restrepo, Pascual, Uneven Growth: Automation&Apos;S Impact on Income and Wealth Inequality (February 2021). NBER Working Paper No. w28440, Available at SSRN: https://ssrn.com/abstract=3781327

Benjamin Moll (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Lukasz Rachel

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Pascual Restrepo

Boston University - Department of Economics ( email )

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