Quantitative effects of two kinds of robots in a neo-classical growth model

• Main Author: VU, Hoang Phuong Que
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2019
• Subjects: Growth Economics; Robots; Economics; Growth and Development
• Online Access: https://ink.library.smu.edu.sg/etd_coll/267; https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1267&context=etd_coll
• Institution: Singapore Management University

Advances in artificial intelligence are leading to many revolutions in robotics. How will the arrival of robots impact the growth of the economy, the workers' wage, consumption, and lifetime welfare? This dissertation attempts to answer this question by presenting a standard neoclassical growth model with two different kinds of robots, reflecting two ways that robots can transform the labor market. The first chapter introduces additive robots- a perfect substitution for human labor, while the second chapter employs multiplicative robots- a type of robots that augments human labor. The prevailing main result is that even in the case with no population growth and technical progress, the application of robots is enough to create a long term economic growth. Nevertheless, there is a difference in the behavior of real wage. The presence of additive robot solely makes wage jumps down and then stays constant throughout while utilization of multiplicative robots alone can increase productivity thus real wage increases fast over time. In the last chapter, both types of robots are applied in the economy with a shrinking population, motivated by Japan. Under the perfect homogeneous labor market, there will be a shift of workers from jobs that can be substituted by additive robots to jobs that can be supported by multiplicative robots. This enables Japan to continue to enjoy the perpetual growth in real wage, consumption and wealth even after the labor market has finished its adjustment. However, as the interest rate would slowly decrease, proportionate to the decline of the population, there would be a point where it is no longer profitable to adopt robots although it would take a long time for the economy to face that issue.