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The Race of Man and Machine: Implications of Technology When Abilities and Demand Constraints Matter

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  • Gries, Thomas

    (University of Paderborn)

  • Naudé, Wim

    (RWTH Aachen University)

Abstract

In "The Race between Man and Machine: Implications of Technology for Growth, Factor Shares, and Employment," Acemoglu and Restrepo (2018b) combine the task-based model of the labor market with an endogenous growth model to model the economic consequences of artificial intelligence (AI). This paper provides an alternative endogenous growth model that addresses two shortcomings of their model. First, we replace the assumption of a representative household with the premise of two groups of households with different preferences. This allows our model to be demand constrained and able to model the consequences of higher income inequality due to AI. Second, we model AI as providing abilities, arguing that "abilities" better characterises the nature of the services that AI provide, rather than tasks or skills. The dynamics of the model regarding the impact of AI on jobs, inequality, wages, labor productivity and long-run GDP growth are explored.

Suggested Citation

  • Gries, Thomas & Naudé, Wim, 2021. "The Race of Man and Machine: Implications of Technology When Abilities and Demand Constraints Matter," IZA Discussion Papers 14341, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp14341
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    References listed on IDEAS

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    1. Daron Acemoglu & Pascual Restrepo, 2019. "Automation and New Tasks: How Technology Displaces and Reinstates Labor," Journal of Economic Perspectives, American Economic Association, vol. 33(2), pages 3-30, Spring.
    2. Gries, Thomas & Naude, Wim, 2018. "Artificial intelligence, jobs, inequality and productivity: Does aggregate demand matter?," MERIT Working Papers 2018-047, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    3. James Bessen, 2018. "AI and Jobs: the role of demand," NBER Working Papers 24235, National Bureau of Economic Research, Inc.
    4. Gries, Thomas & Naude, Wim, 2020. "Artificial Intelligence, Income Distribution and Economic Growth," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224623, Verein für Socialpolitik / German Economic Association.
    5. Gries, Thomas & Naudé, Wim, 2011. "Entrepreneurship and human development: A capability approach," Journal of Public Economics, Elsevier, vol. 95(3), pages 216-224.
    6. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
    7. 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.
    8. Philippe Aghion & Benjamin F. Jones & Charles I. Jones, 2018. "Artificial Intelligence and Economic Growth," NBER Chapters, in: The Economics of Artificial Intelligence: An Agenda, pages 237-282, National Bureau of Economic Research, Inc.
    9. Seth G. Benzell & Laurence J. Kotlikoff & Guillermo LaGarda & Jeffrey D. Sachs, 2015. "Robots Are Us: Some Economics of Human Replacement," NBER Working Papers 20941, National Bureau of Economic Research, Inc.
    10. Thomas Gries & Wim Naudé, 2022. "Modelling artificial intelligence in economics," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 56(1), pages 1-13, December.
    11. David H. Autor & David Dorn, 2013. "The Growth of Low-Skill Service Jobs and the Polarization of the US Labor Market," American Economic Review, American Economic Association, vol. 103(5), pages 1553-1597, August.
    12. Daron Acemoglu & Pascual Restrepo, 2018. "The Race between Man and Machine: Implications of Technology for Growth, Factor Shares, and Employment," American Economic Review, American Economic Association, vol. 108(6), pages 1488-1542, June.
    13. Seth G. Benzell & Laurence J. Kotlikoff & Guillermo LaGarda & Jeffrey D. Sachs, 2015. "Robots Are Us: Some Economics of Human Replacement," NBER Working Papers 20941, National Bureau of Economic Research, Inc.
    14. Thomas Gries, 2020. "A New Theory of Demand-Restricted Growth: The Basic Idea," The American Economist, Sage Publications, vol. 65(1), pages 11-27, March.
    15. Jeffrey D. Sachs & Seth G. Benzell & Guillermo LaGarda, 2015. "Robots: Curse or Blessing? A Basic Framework," NBER Working Papers 21091, National Bureau of Economic Research, Inc.
    16. Dario Cords & Klaus Prettner, 2022. "Technological unemployment revisited: automation in a search and matching framework [The future of work: meeting the global challenges of demographic change and automation]," Oxford Economic Papers, Oxford University Press, vol. 74(1), pages 115-135.
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    Cited by:

    1. Magnus Henrekson & Dan Johansson & Johan Karlsson, 2024. "To Be or Not to Be: The Entrepreneur in Neo-Schumpeterian Growth Theory," Entrepreneurship Theory and Practice, , vol. 48(1), pages 104-140, January.
    2. Gries, Thomas & Naudé, Wim, 2022. "Modelling artificial intelligence in economics," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 56, pages 1-12.
    3. Hind Bril El-Haouzi & Etienne Valette & Bettina-Johanna Krings & António Brandão Moniz, 2021. "Social Dimensions in CPS & IoT Based Automated Production Systems," Societies, MDPI, vol. 11(3), pages 1-15, August.
    4. Wim Naudé, 2022. "From the entrepreneurial to the ossified economy," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 46(1), pages 105-131.

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    More about this item

    Keywords

    technology; artificial intelligence; productivity; labor demand; income distribution; growth theory;
    All these keywords.

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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