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Automation and Growth in the Solow Model: Threshold Dynamics, Transitions, and Long-Run Outcomes

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  • Sriket, Hongsilp

Abstract

This paper introduces automation into an otherwise standard Solow growth model and shows that doing so can generate qualitatively different global dynamics. By modeling automation as a distinct form of capital and defining aggregate assets as the sum of physical and automation capital, the law of motion for aggregate assets per capita becomes piecewise defined, with a threshold separating a regime without automation from one in which physical and automation capital are jointly accumulated. Depending on the saving rate and structural parameters, the economy may converge to a Solow-type steady state without automation, a mixed-capital steady state with automation, or exhibit unbounded AK-type growth. We identify simple parameter restrictions that govern the feasibility of sustained growth and the long-run adoption of automation. Furthermore, we complement the qualitative analysis with closed-form solutions that provide a tractable and transparent characterization of the model’s full dynamic path.

Suggested Citation

  • Sriket, Hongsilp, 2026. "Automation and Growth in the Solow Model: Threshold Dynamics, Transitions, and Long-Run Outcomes," MPRA Paper 127795, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:127795
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    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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