Working Paper: NBER ID: w26658
Authors: Debraj Ray; Dilip Mookherjee
Abstract: We provide an argument for long-term automation and decline in the labor income share, driven by capital accumulation rather than technical progress or rising markups. We emphasize a fundamental asymmetry across physical and human capital. An individual can indefinitely replicate her claims on the former, but — after a point — her human endowment cannot be cloned and rescaled in the same way. Then ongoing capital accumulation gives rise to progressive automation, and the share of labor income converges to zero. The displacement of human labor is gradual, and real wages could rise indefinitely. The results extend to endogenous technical change.
Keywords: Automation; Labor Income Share; Capital Accumulation; Technical Change
JEL Codes: D33; E25; J24; J31; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Ongoing capital accumulation (E22) | Progressive automation (O31) |
| Progressive automation (O31) | Labor income share converging to zero (J39) |
| Ongoing capital accumulation (E22) | Labor income share converging to zero (J39) |
| Ongoing capital accumulation (E22) | Displacement of human labor (F66) |
| Displacement of human labor (F66) | Labor income share converging to zero (J39) |
| Singularity condition in robot sector (C69) | Price of robots tied to price of capital (D24) |
| Price of robots tied to price of capital (D24) | Automation dominating in the long run (L23) |
| Ongoing capital accumulation (E22) | Rising real wages (J39) |