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Machines as Engines of Growth

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  • Joseph Zeira

Abstract

This paper builds a model of growth through industrialization, where machines replace workers in a growing number of tasks. This enables the economy to experience long-run growth, as machines become servants of humans, and as their number grows unboundedly. The mechanism that drives growth is feedback between industrialization and wages. High wages provide incentives to use machines, while industrialization raises wages. The model shows that industrialization and growth take off only if the economy is productive enough. It also shows that monopoly power can stifle growth, as it lowers wages. Hence, a one-time increase in productivity, or a reduction of monopoly power can push economies from stagnation to industrialization.

Suggested Citation

  • Joseph Zeira, 2006. "Machines as Engines of Growth," DEGIT Conference Papers c011_059, DEGIT, Dynamics, Economic Growth, and International Trade.
    • Handle: RePEc:deg:conpap:c011_059
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    File URL: http://degit.sam.sdu.dk/papers/degit_11/C011_059.pdf
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    References listed on IDEAS

    as
    1. Joseph Zeira, 1998. "Workers, Machines, and Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1091-1117.
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    More about this item

    Keywords

    Economic Growth; Industrialization; Technology;
    All these keywords.

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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