Growth and Welfare

Paper Session

Saturday, Jan. 7, 2017 2:30 PM – 4:30 PM

Hyatt Regency Chicago, Regency C
Hosted By: American Economic Association
  • Chair: John Van Reenen, Massachusetts Institute of Technology

Robots and Jobs: Evidence from U.S. Labor Markets

Daron Acemoglu
,
Massachusetts Institute of Technology and NBER
Pascual Restrepo
,
Massachusetts Institute of Technology

Abstract

The rapid aging of the population of many countries is often viewed as an unadulterated burden on their economies. In this paper, we argue that aging, by creating a shortage of labor, can lead to more rapid adoption of productivity-enhancing automation (in particular, robotics) technology, and this trend should be more pronounced in industries where there are more routine jobs that can be automated and where the dependence on a younger workforce is greater. We then show, in a panel of countries spanning the last 20 years, that those aging more rapidly tend to adopt more robots per worker, and that this technology adoption decision is primarily a response to anticipated demographic dynamics. Then exploiting the cross-industry dimension, we also show that, consistent with theory, the trend towards more robots is driven by industries that have a greater fraction of routine jobs and that tend to employ younger workers (in the United States).

Balanced Growth Despite Uzawa

Gene Grossman
,
Princeton University
Elhanan Helpman
,
Harvard University
Ezra Oberfield
,
Princeton University
Thomas Sampson
,
London School of Economics and Political Science

Abstract

The evidence for the United States points to balanced growth despite falling investment-good prices and a less-than-unitary elasticity of substitution between capital and labor. This is inconsistent with the Uzawa Growth Theorem. We extend Uzawa's theorem to show that the introduction of human capital accumulation in the standard way does not resolve the puzzle. However, balanced growth is possible if education is endogenous and capital is more complementary with schooling than with raw labor. We present a class of aggregate production functions for which a neoclassical growth model with capital-augmenting technological progress and endogenous schooling converges to a balanced growth path.

The Costs and Benefits of Leaving the Eurpoean Union

Swati Dhingra
,
London School of Economics and Political Science
Gianmarco Ottaviano
,
London School of Economics and Political Science
Thomas Sampson
,
London School of Economics and Political Science
John Van Reenen
,
Massachusetts Institute of Technology

Abstract

What would be the economic effects of the UK leaving the European Union on living standards of British people? We focus on the effects of trade on welfare net of lower fiscal transfers to the EU. We use a standard quantitative static general equilibrium trade model with multiple sectors, countries and intermediates, as in Costinot and Rodriguez-Clare (2013). Static losses range between 1.13% and 3.09% of GDP, depending on the assumptions used in our counterfactual scenarios. Including dynamic effects could more than double such losses.

A Unified Approach to Estimating Demand and Welfare

Stephen Redding
,
Princeton University
David Weinstein
,
Columbia University

Abstract

The measurement of price changes, economic welfare, and demand parameters is currently based on three disjoint approaches: macroeconomic models derived from time-invariant utility functions, microeconomic estimation based on time-varying utility (demand) systems, and actual price and real output data constructed using formulas that differ from either approach. The inconsistencies are so deep that the same assumptions that form the foundation of demand-system estimation can be used to prove that standard price indexes are incorrect, and the assumptions underlying standard exact and superlative price indexes invalidate demand-system estimation. In other words, we show that extant micro and macro welfare estimates are mutually inconsistent, and neither is consistent with the data. We develop a unified approach to demand and price measurement that exactly rationalizes observed micro data on prices and expenditure shares while permitting exact aggregation and meaningful macro comparisons of welfare over time. We show that all standard price indexes are special cases of our approach for particular values of the elasticity of substitution, constant demand for each good and a constant set of goods. In contrast to these standard index numbers, our approach allows us to compute changes in the cost of living that take into account both changes in the demand for individual goods and the entry and exit of goods over time. Using barcode data for the U.S. consumer goods industry, we show that allowing for the entry and exit of products, changes in demand for individual goods, and a value for the elasticity of substitution estimated from the data yields substantially different conclusions for changes in the cost of living from standard index numbers.
JEL Classifications
  • E1 - General Aggregative Models
  • O4 - Economic Growth and Aggregate Productivity