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Capital-augmenting technical change in the context of untapped automation opportunities

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  • Jacobs, Arthur

Abstract

I explore the effects of capital-augmenting technical change (CATC) in a task-based production setting where untapped automation opportunities exist. I contribute to the literature by showing analytically that CATC is a convenient modeling approach to automation, of which the labor market implications match the empirical literature. In my setting, CATC lowers the labor share of income even in the face of strong capital–labor complementarity. The intuitive explanation for this result is that the standard effect of CATC is more than fully offset by a contraction in the set of non-automated tasks, executed by labor. Furthermore, I show that CATC increases the wage rate unambiguously.

Suggested Citation

  • Jacobs, Arthur, 2023. "Capital-augmenting technical change in the context of untapped automation opportunities," Mathematical Social Sciences, Elsevier, vol. 123(C), pages 155-166.
    • Handle: RePEc:eee:matsoc:v:123:y:2023:i:c:p:155-166
    DOI: 10.1016/j.mathsocsci.2023.03.007
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    More about this item

    Keywords

    Automation; Capital-augmenting technical change; Task-based production; Factor shares;
    All these keywords.

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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