DP14286 Growth, Automation and the Long Run Share of Labor

Author(s): Dilip Mookherjee, Debraj Ray
Publication Date: January 2020
Keyword(s):
JEL(s):
Programme Areas: Development Economics, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14286

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.