Simulating Endogenous Global Automation

61 Pages Posted: 13 Sep 2021 Last revised: 18 Nov 2021

See all articles by Seth Benzell

Seth Benzell

Chapman University - The George L. Argyros School of Business & Economics; MIT Initiative on the Digital Economy; Stanford University, Human-Centered Artificial Intelligence Digital Economy Lab

Laurence J. Kotlikoff

Boston University - Department of Economics; National Bureau of Economic Research (NBER); Gaidar Institute for Economic Policy

Guillermo Lagarda

Global Development Policy Center Boston University

Victor Yifan Ye

Boston University

Date Written: September 2021

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.

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Suggested Citation

Benzell, Seth and Kotlikoff, Laurence J. and Lagarda, Guillermo and Ye, Victor Yifan, Simulating Endogenous Global Automation (September 2021). NBER Working Paper No. w29220, Available at SSRN: https://ssrn.com/abstract=3922494 or http://dx.doi.org/10.2139/ssrn.3922494

Seth Benzell (Contact Author)

Chapman University - The George L. Argyros School of Business & Economics ( email )

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MIT Initiative on the Digital Economy ( email )

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Laurence J. Kotlikoff

Boston University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Gaidar Institute for Economic Policy

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Guillermo Lagarda

Global Development Policy Center Boston University ( email )

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United States

Victor Yifan Ye

Boston University ( email )

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United States

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