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  3. American Economic Review
  4. June 2018
  5. The Race between Man and Machine: Implications of Technology for Growth, Factor Shares, and Employment

The Race between Man and Machine: Implications of Technology for Growth, Factor Shares, and Employment

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Abstract

We examine the concerns that new technologies will render labor redundant in a framework in which tasks previously performed by labor can be automated and new versions of existing tasks, in which labor has a comparative advantage, can be created. In a static version where capital is fixed and technology is exogenous, automation reduces employment and the labor share, and may even reduce wages, while the creation of new tasks has the opposite effects. Our full model endogenizes capital accumulation and the direction of research toward automation and the creation of new tasks. If the long-run rental rate of capital relative to the wage is sufficiently low, the long-run equilibrium involves automation of all tasks. Otherwise, there exists a stable balanced growth path in which the two types of innovations go hand-in-hand. Stability is a consequence of the fact that automation reduces the cost of producing using labor, and thus discourages further automation and encourages the creation of new tasks. In an extension with heterogeneous skills, we show that inequality increases during transitions driven both by faster automation and the introduction of new tasks, and characterize the conditions under which inequality stabilizes in the long run.

Citation

Acemoglu, Daron, and Pascual Restrepo. 2018. "The Race between Man and Machine: Implications of Technology for Growth, Factor Shares, and Employment." American Economic Review, 108 (6): 1488-1542. DOI: 10.1257/aer.20160696

Additional Materials

JEL Classification

  • D63 Equity, Justice, Inequality, and Other Normative Criteria and Measurement
  • E22 Investment; Capital; Intangible Capital; Capacity
  • E23 Macroeconomics: Production
  • E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
  • J24 Human Capital; Skills; Occupational Choice; Labor Productivity
  • O33 Technological Change: Choices and Consequences; Diffusion Processes
  • O41 One, Two, and Multisector Growth Models