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Automation, New Technology, and Non-Homothetic Preferences

Author

Listed:
  • Clemens Struck

    (University College Dublin)

  • Adnan Velic

    (Dublin Institute of Technology)

Abstract

This paper provides a microfoundation of the neoclassical growth theory. To rationalize a substantial share of labor in income despite ongoing automation of tasks, we present a simple model in which demand shifts toward goods of increasing sophistication along a vertically differentiated production structure. Automation of more advanced goods requires increasingly sophisticated capital which remains scarce along the growth path. This is why labor maintains a substantial share in income independent of core parameter assumptions. While our model features an entirely different mechanism, we show that its aggregate representation is the one of a neoclassical model with labor-augmenting technical change.

Suggested Citation

  • Clemens Struck & Adnan Velic, 2017. "Automation, New Technology, and Non-Homothetic Preferences," Trinity Economics Papers tep1217, Trinity College Dublin, Department of Economics.
    • Handle: RePEc:tcd:tcduee:tep1217
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    References listed on IDEAS

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    Cited by:

    1. Clemens C. Struck, 2017. "On the Interaction of Growth, Trade and International Macroeconomics," Working Papers 201724, School of Economics, University College Dublin.

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    More about this item

    Keywords

    Uzawa s theorem; automation; goods quality; structural change; reallocations; growth; non-homothetic preferences; hierarchical demand;
    All these keywords.

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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