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Machines as Engines of Growth

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  • Zeira, Joseph

Abstract

This paper builds a model of growth through industrialization, as 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 can grow unboundedly. The mechanism that drives growth is the feedback between industrialization and wages. High wages are incentives to use machines and industrialize, 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.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5429.

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Date of creation: Dec 2005
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Handle: RePEc:cpr:ceprdp:5429

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Keywords: economic growth; industrialization; technology;

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References

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  1. Charles I. Jones & John C. Williams, . "Too Much of a Good Thing? The Economics of Investment in R&D," Working Papers 96005, Stanford University, Department of Economics.
  2. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  3. Sergio T. Rebelo, 1990. "Long Run Policy Analysis and Long Run Growth," NBER Working Papers 3325, National Bureau of Economic Research, Inc.
  4. Segerstrom, Paul S & Anant, T C A & Dinopoulos, Elias, 1990. "A Schumpeterian Model of the Product Life Cycle," American Economic Review, American Economic Association, vol. 80(5), pages 1077-91, December.
  5. Saint-Paul, Gilles, 2001. "Distribution and Growth in an Economy with Limited Needs," IDEI Working Papers 125, Institut d'Économie Industrielle (IDEI), Toulouse.
  6. Hernando Zuleta, 2007. "Why labor income shares seem to be constant?," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 16(4), pages 551-557.
  7. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-51, March.
  8. Barro, Robert J, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 407-43, May.
  9. Joseph Zeira, 1998. "Workers, Machines, And Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1091-1117, November.
  10. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 3-17, Summer.
  11. Jones, Charles I, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 495-525, May.
  12. David N. Weil, 1996. "Appropriate Technology and Growth," Working Papers 96-24, Brown University, Department of Economics.
  13. Paul Beaudry & Fabrice Collard, 2002. "Why has the Employment-Productivity Tradeoff among Industrialized Countries been so strong?," NBER Working Papers 8754, National Bureau of Economic Research, Inc.
  14. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1008-38, October.
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