How Does Automation Affect Economic Growth and Income Distribution in a Two-Class Economy?

Sasaki, Hiroaki and Hagiwara, Takefumi and Pham, Huong and Fukatani, Noriki and Ogawa, Shogo and Okahara, Naoto (2021): How Does Automation Affect Economic Growth and Income Distribution in a Two-Class Economy?

Abstract

This study uses a growth model with automation technology to consider two classes---workers and capitalists---and investigates how advances in automation technology affect economic growth and income distribution. In addition to the two production factors labor and traditional capital, we consider automation capital as the third production factor. We also introduce Pasinetti-type saving functions into the model to investigate how the difference between the capitalists' and workers' saving rates affect economic growth and income distribution. When the capitalists' saving rate is higher than a threshold level, per capita output exhibits endogenous growth irrespective of the workers' savings rate. In this case, the income gap between workers and capitalists widens over time. When the capitalists' saving rate is less than the threshold level, two different long-run states occur depending on the workers' saving rate: the capitalists' own automation capital share approaches a constant, and it approaches zero. In both cases, the per capita output growth is zero and the income gap between the two classes becomes constant over time.

• Item Type: MPRA Paper
• Language: English
• Keywords: automation technology; endogenous growth; income distribution
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E25 - Aggregate Factor Income Distribution; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; 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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