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The Hardware-Software Model: A New Conceptual Framework of Production, R&D, and Growth with AI

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  • Jakub Growiec

Abstract

The article proposes a new conceptual framework for capturing production, R&D, and economic growth in aggregative models which extend their horizon into the digital era. Two key factors of production are considered: hardware, including physical labor, traditional physical capital and programmable hardware, and software, encompassing human cognitive work, pre-programmed software, and artificial intelligence (AI). Hardware and software are complementary in production whereas their constituent components are mutually substitutable. The framework generalizes, among others, the standard model of production with capital and labor, models with capital–skill complementarity and skill-biased technical change, and unified growth theories embracing also the pre-industrial period. It offers a clear conceptual distinction between mechanization and automation as well as between robotization and the development of AI. It delivers sharp, economically intuitive predictions for long-run growth, the evolution of factor shares, and the direction of technical change

Suggested Citation

  • Jakub Growiec, 2019. "The Hardware-Software Model: A New Conceptual Framework of Production, R&D, and Growth with AI," KAE Working Papers 2019-042, Warsaw School of Economics, Collegium of Economic Analysis.
    • Handle: RePEc:sgh:kaewps:2019042
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    Cited by:

    1. Jakub Growiec, 2020. "What Will Drive Long-Run Growth in the Digital Age?," KAE Working Papers 2020-054, Warsaw School of Economics, Collegium of Economic Analysis.
    2. Growiec, Jakub, 2022. "Automation, Partial And Full," Macroeconomic Dynamics, Cambridge University Press, vol. 26(7), pages 1731-1755, October.
    3. Gasteiger, Emanuel & Prettner, Klaus, 2022. "Automation, Stagnation, And The Implications Of A Robot Tax," Macroeconomic Dynamics, Cambridge University Press, vol. 26(1), pages 218-249, January.
    4. Jakub Growiec & Peter McAdam & Jakub Mućk, 2022. "Are Ideas Really Getting Harder To Find? R&D Capital and the Idea Production Function," KAE Working Papers 2022-071, Warsaw School of Economics, Collegium of Economic Analysis.
    5. repec:gdk:wpaper:67 is not listed on IDEAS

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    More about this item

    Keywords

    production function; R&D equation; technological progress; complementarity; automation; artificial intelligence.;
    All these keywords.

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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