Automation and Growth in the Solow Model: Threshold Dynamics, Transitions, and Long-Run Outcomes

Sriket, Hongsilp (2026): Automation and Growth in the Solow Model: Threshold Dynamics, Transitions, and Long-Run Outcomes.

Abstract

This paper introduces automation into an otherwise standard Solow growth model and shows that doing so can generate qualitatively different global dynamics. By modeling automation as a distinct form of capital and defining aggregate assets as the sum of physical and automation capital, the law of motion for aggregate assets per capita becomes piecewise defined, with a threshold separating a regime without automation from one in which physical and automation capital are jointly accumulated. Depending on the saving rate and structural parameters, the economy may converge to a Solow-type steady state without automation, a mixed-capital steady state with automation, or exhibit unbounded AK-type growth. We identify simple parameter restrictions that govern the feasibility of sustained growth and the long-run adoption of automation. Furthermore, we complement the qualitative analysis with closed-form solutions that provide a tractable and transparent characterization of the model’s full dynamic path.

• Item Type: MPRA Paper
• Language: English
• Keywords: Solow growth model; automation; saving rate; transitional dynamics; threshold dynamics; closed-form solutions
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models

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