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The lost race against the machine: Automation, education and inequality in an R&D-based growth model

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  • Prettner, Klaus
  • Strulik, Holger

Abstract

We analyze the effect of automation on economic growth and inequality in an R&D-based growth model with two types of labor: highskilled labor that is complementary to machines and low-skilled labor that is a substitute for machines. The model predicts that innovationdriven growth leads to increasing automation, an increasing skill premium, an increasing population share of graduates, increasing income and wealth inequality, a declining labor share, and (in an extension of the basic model) increasing unemployment. In contrast to Piketty's famous claim that faster economic growth reduces inequality, our theory predicts that faster economic growth promotes inequality.

Suggested Citation

  • Prettner, Klaus & Strulik, Holger, 2017. "The lost race against the machine: Automation, education and inequality in an R&D-based growth model," Hohenheim Discussion Papers in Business, Economics and Social Sciences 08-2017, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    • Handle: RePEc:zbw:hohdps:082017
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    More about this item

    Keywords

    Automation; R&D-Based Growth; Inequality; Wealth Concentration;
    All these keywords.

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • 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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