Working Paper: NBER ID: w29220
Authors: Seth G. Benzell; Laurence J. Kotlikoff; Guillermo Lagarda; Victor Yifan Ye
Abstract: This paper develops a 17-region, 3-skill group, overlapping generations, computable general equilibrium model to evaluate the global consequences of automation. Automation, modeled as capital- and high-skill biased technological change, is endogenous with regions adopting new technologies when profitable. Our approach captures and quantifies key macro implications of a range of foundational models of automation. In our baseline scenario, automation has a moderate effect on regional outputs and a small effect on world interest rates. However, it has a major impact on inequality, both wage inequality within regions and per capita GDP inequality across regions. We examine two policy responses to technological change -- mandating use of the advanced technology and providing universal basic income to share gains from automation. The former policy can raise a region's output, but at a welfare cost. The latter policy can transform automation into a win-win for all generations in a region.
Keywords: automation; inequality; computable general equilibrium; policy responses; universal basic income
JEL Codes: E1; E23; F43; O31; O33; O4; O41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| automation (L23) | increased income inequality (D31) |
| automation (L23) | increased economic output (O49) |
| automation (L23) | increased wage inequality within regions (J31) |
| automation (L23) | decreased low-skilled wages (F66) |
| mandating advanced technology (Q55) | increased regional output (R15) |
| mandating advanced technology (Q55) | welfare cost (D69) |
| universal basic income (H53) | transformed automation into win-win situation (L23) |
| technological change (O33) | inequality (D63) |
| technological change (O33) | output (C67) |