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Robots and humans: The role of fiscal and monetary policies in an endogenous growth model

Author

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  • Afonso, Óscar
  • Sochirca, Elena
  • Neves, Pedro Cunha

Abstract

In this paper we develop an endogenous growth model to analyze how fiscal and monetary policies can manage the macroeconomic effects of the robotization process. We consider that unskilled labor can be replaced by robots and that: (i) the government collects tax revenues to invest in social capital and compensate those who lose their jobs; (ii) there is monetary policy with cash-in-advance restrictions; (iii) social capital contributes to increasing technological-knowledge progress. Our results confirm that robotization stimulates economic growth, but contributes to widening wage inequality between skilled and unskilled workers. We show that, under specific circumstances, an expansionary monetary policy or a more progressive taxation can attenuate such widening effect. We also show that public investment in social capital and public transfers to those who lose their jobs play a crucial role in attenuating the negative consequences of rising unemployment caused by robotization.

Suggested Citation

  • Afonso, Óscar & Sochirca, Elena & Neves, Pedro Cunha, 2025. "Robots and humans: The role of fiscal and monetary policies in an endogenous growth model," Mathematical Social Sciences, Elsevier, vol. 133(C), pages 49-59.
    • Handle: RePEc:eee:matsoc:v:133:y:2025:i:c:p:49-59
    DOI: 10.1016/j.mathsocsci.2024.11.005
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    Keywords

    Robotization; Social capital; Fiscal policy; Monetary policy; Growth; Inequality;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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