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Discussion Paper Details

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Title: Machines as Engines of Growth

Author(s): Joseph Zeira

Publication Date: December 2005

Keyword(s): economic growth, industrialization and technology

Programme Area(s): International Macroeconomics

Abstract: This paper builds a model of growth through industrialization, as machines replace workers in a growing number of tasks. This enables the economy to experience long-run growth, as machines become servants of humans, and as their number can grow unboundedly. The mechanism that drives growth is the feedback between industrialization and wages. High wages are incentives to use machines and industrialize, while industrialization raises wages. The model shows that industrialization and growth take off only if the economy is productive enough. It also shows that monopoly power can stifle growth, as it lowers wages. Hence, a one-time increase in productivity, or a reduction of monopoly power can push economies from stagnation to industrialization.

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Bibliographic Reference

Zeira, J. 2005. 'Machines as Engines of Growth'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=5429