Automation in a Business Cycle Model: Insights from RANK

36 Pages Posted: 6 Feb 2023

See all articles by Nikolaos Charalampidis

Nikolaos Charalampidis

Université Laval - Département d'Économique

Date Written: February 2, 2023


This paper studies the business cycle implications of automation. It incorporates task-based production and a Ricardian labor market in the RANK model. Automation operates via labor displacement and productivity gains, captured by sufficient statistics describing the morphology of factor productivities. When nominal rigidities interact with frictions in capital supply, automation amplifies labor displacement, lowers the real wage instead of raising it, attenuates productivity gains, and leads to a negative output gap compared to its impact under flexible prices. These responses are aligned with empirical evidence and separate automation from other aggregate shocks. The labor income share drops regardless price rigidities. Labor market imperfections, be it sticky wages or search-and-matching frictions, further amplify the labor displacement and attenuate the productivity gains. Technological expansions under nominal rigidities, contractionary monetary policies, as well as cyclical wage increases stemming, possibly, from market power lead to inefficient automation.

Keywords: automation, robots, inflation, monetary policy

JEL Classification: E24, E25, E32, E52, O33

Suggested Citation

Charalampidis, Nikolaos, Automation in a Business Cycle Model: Insights from RANK (February 2, 2023). Available at SSRN: or

Nikolaos Charalampidis (Contact Author)

Université Laval - Département d'Économique ( email )

2325 Rue de l'Université
Ste-Foy, Quebec G1K 7P4 G1K 7P4

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