Innovation, Automation, and Inequality: Policy Challenges in the Race Against the Machine
in: Lectures "WIFO-Extern"
Lectures "WIFO-Extern", Österreichisches Institut für Wirtschaftsforschung, Wien, 12.07.2019
Online since: 28.06.2019 0:00
We analyse the effects of R&D-driven automation on economic growth, education, and inequality when high-skilled workers are
complements to machines and low-skilled workers are substitutes for machines. The model predicts that innovation-driven growth
leads to an increasing population share of college graduates, increasing income and wealth inequality, and a declining labour
share. We use the model to analyse the effects of redistribution. We show that it is difficult to improve income of low-skilled
individuals as long as both technology and education are endogenous. This is true irrespective of whether redistribution is
financed by progressive wage taxation or by a robot tax. Only when higher education is stationary, redistribution unambiguously
benefits the poor. We show that education subsidies affect the economy differently depending on their mode of funding and
that they may actually reduce education. Finally, we extend the model by fair wage concerns and show how automation could
induce involuntary low-skilled unemployment.
Keywords:TP_Wettbewerbsfaehigkeit
Research group:Industrial, Innovation and International Economics