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Machines as Engines of Growth

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  • Joseph Zeira

Abstract

This paper builds a model of growth through industrialization, where 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 grows unboundedly. The mechanism that drives growth is feedback between industrialization and wages. High wages provide incentives to use machines, 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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File URL: http://www.degit.ifw-kiel.de/papers/degit_11/C011_059.pdf
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Bibliographic Info

Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c011_059.

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Length: 36 pages
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:deg:conpap:c011_059

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Keywords: Economic Growth; Industrialization; Technology;

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References

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  1. 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.
  2. Joseph Zeira, 1998. "Workers, Machines, And Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1091-1117, November.
  3. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
  4. Saint-Paul, Gilles, 2001. "Distribution and Growth in an Economy with Limited Needs," IZA Discussion Papers 273, Institute for the Study of Labor (IZA).
  5. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 3-17, Summer.
  6. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
  7. 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.
  8. Charles I. Jones & John C. Williams, 1999. "Too Much of a Good Thing? The Economics of Investment in R&D"," Working Papers 99015, Stanford University, Department of Economics.
  9. 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.
  10. David N. Weil, 1996. "Appropriate Technology and Growth," Working Papers 96-24, Brown University, Department of Economics.
  11. Hernando Zuleta, 2007. "Why labor income shares seem to be constant?," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 16(4), pages 551-557.
  12. Sergio Rebelo, 1999. "Long Run Policy Analysis and Long Run Growth," Levine's Working Paper Archive 2114, David K. Levine.
  13. 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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Citations

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Cited by:
  1. Hernando Zuleta, 2008. "Seasons, savings and GDP," DOCUMENTOS DE TRABAJO 004592, UNIVERSIDAD DEL ROSARIO.
  2. Brad Sturgill, 2009. "Cross-country Variation in Factor Shares and its Implications for Development Accounting," Working Papers 09-07, Department of Economics, Appalachian State University.
  3. Boldrin, Michele & Levine, David K., 2008. "Perfectly competitive innovation," Journal of Monetary Economics, Elsevier, vol. 55(3), pages 435-453, April.
  4. Hernando Zuleta, 2007. "Biased technological change, human capital and factor shares," DOCUMENTOS DE TRABAJO 004380, UNIVERSIDAD DEL ROSARIO.
  5. Alberto Alesina & Joeph Zeira, . "Technology and Labor Regulations," Working Papers 0729, University of Crete, Department of Economics.
  6. Bental, Benjamin & Demougin, Dominique, 2010. "Declining labor shares and bargaining power: An institutional explanation," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 443-456, March.
  7. Zuleta, Hernando, 2009. "If factor shares are not constant then we have a measurment problem. can we solve it?," DOCUMENTOS DE TRABAJO 005744, UNIVERSIDAD DEL ROSARIO.
  8. Hernando Zuleta, 2008. "Factor Saving Innovations and Factor Income Shares," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 836-851, October.
  9. Hernando Zuleta & Andrew T. Young, 2007. "Labor's shares – aggregate and industry: accounting for both in a model of unbalanced growth with induced innovation," DOCUMENTOS DE TRABAJO 003105, UNIVERSIDAD DEL ROSARIO.
  10. Tetsugen Haruyama, 2009. "Competitive Innovation with Codified And Tacit Knowledge," Discussion Papers 0905, Graduate School of Economics, Kobe University.
  11. Hernando Zuleta & Julián Parada & Andrés García & Jacobo Campo, 2010. "Participación factorial y contabilidad del crecimiento económico en Colombia .Una propuesta de modificación del método de contabilidad del crecimiento," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE.
  12. Nakamura, Hideki, 2009. "Micro-foundation for a constant elasticity of substitution production function through mechanization," Journal of Macroeconomics, Elsevier, vol. 31(3), pages 464-472, September.

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