Automation, Growth, and Factor Shares in the Era of Population Aging

Irmen, Andreas

doi:10.1007/s10887-021-09195-w

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Automation, Growth, and Factor Shares in the Era of Population Aging

Irmen, Andreas

2021 • In Journal of Economic Growth, 26, p. 415-453

Peer reviewed

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https://hdl.handle.net/10993/52842

DOI
10.1007/s10887-021-09195-w

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Keywords :

Population aging; Automation; Factor shares; Endogenous technical change; Endogenous labor supply

Abstract :

[en] How does population aging affect economic growth and factor shares in times of increasingly automatable production processes? The present paper addresses this question in a new macroeconomic model of automation where competitive firms perform tasks to produce output. Tasks require labor and machines as inputs. New machines embody superior technological knowledge and substitute for labor in the performance of tasks. Automation is labor-augmenting in the reduced-form aggregate production function. If wages increase then the incentive to automate becomes stronger. Moreover, the labor share declines even though the aggregate production function is Cobb–Douglas. Population aging due to a higher longevity reduces automation in the short and promotes it in the long run. It boosts the growth rate of absolute and per-capita GDP in the short and the long run, lifts the labor share in the short and reduces it in the long run. Population aging due to a decline in fertility increases automation, reduces the growth rate of GDP, and lowers the labor share in the short and the long run. In the short run, it may or may not increase the growth rate of per-capita GDP, in the long run it unequivocally accelerates per-capita GDP growth.

Disciplines :

Macroeconomics & monetary economics

Author, co-author :

Irmen, Andreas ; University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Department of Economics and Management (DEM)

External co-authors :

Language :

English

Title :

Automation, Growth, and Factor Shares in the Era of Population Aging

Publication date :

December 2021

Journal title :

Journal of Economic Growth

Publisher :

Springer, Heidelberg, Germany

Volume :

Pages :

415-453

Peer reviewed :

Peer reviewed

Focus Area :

Sustainable Development

Additional URL :

https://ideas.repec.org/a/kap/jecgro/v26y2021i4d10.1007_s10887-021-09195-w.html

FnR Project :

FNR11591926 - Competitive Growth Theory, 2017 (01/03/2018-30/08/2018) - Andreas Irmen

Name of the research project :

Competitive Growth Theory—CGT

Funders :

Inter Mobility Program of the FNR Luxembourg (“Competitive Growth Theory—CGT”)

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since 22 November 2022

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