The Rise of the Machines: Automation, Horizontal Innovation, and Income Inequality
Research output: Contribution to journal › Journal article › Research › peer-review
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- HO3_June24_2020
Submitted manuscript, 1.36 MB, PDF document
We build an endogenous growth model with automation (the replacement of low-skill workers with machines) and horizontal innovation (the creation of new products). Over time, the share of automation innovations endogenously increases through an increase in low-skill wages, leading to an increase in the skill premium and a decline in the labor share. We calibrate the model to the US economy and show that it quantitatively replicates the paths of the skill premium, the labor share, and labor productivity. Our model offers a new perspective on recent trends in the income distribution by showing that they can be explained endogenously.
Original language | English |
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Journal | American Economic Journal: Macroeconomics |
Volume | 14 |
Issue number | 1 |
Pages (from-to) | 179-223 |
ISSN | 1945-7707 |
DOIs | |
Publication status | Published - Jan 2022 |
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ID: 291012971