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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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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. Pritchett, Lant, 1995. "Divergence, big time," Policy Research Working Paper Series 1522, The World Bank.
  3. Jones, Charles I & Williams, John C, 2000. " Too Much of a Good Thing? The Economics of Investment in R&D," Journal of Economic Growth, Springer, vol. 5(1), pages 65-85, March.
  4. 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.
  5. 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.
  6. Saint-Paul, Gilles, 2001. "Distribution and Growth in an Economy with Limited Needs," IZA Discussion Papers 273, Institute for the Study of Labor (IZA).
  7. Susanto Basu & David N. Weil, 1996. "Appropriate Technology and Growth," NBER Working Papers 5865, National Bureau of Economic Research, Inc.
  8. 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.
  9. Hernando Zuleta, 2007. "Why labor income shares seem to be constant?," DOCUMENTOS DE TRABAJO 003779, UNIVERSIDAD DEL ROSARIO.
  10. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  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. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," UWO Department of Economics Working Papers 8904, University of Western Ontario, Department of Economics.
  13. Sergio Rebelo, 1999. "Long Run Policy Analysis and Long Run Growth," Levine's Working Paper Archive 2114, David K. Levine.
  14. Joseph Zeira, 1998. "Workers, Machines, And Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1091-1117, November.
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