Growth Effects of Additive and Multiplicative Robots Alongside Conventional Machines

• Main Author: HOON, Hian Teck
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2019
• Subjects: Economics
• Online Access: https://ink.library.smu.edu.sg/soe_research/2327; https://ink.library.smu.edu.sg/context/soe_research/article/3326/viewcontent/Hoon_HUP_working_paper_.pdf
• Institution: Singapore Management University

We study the effects of introducing two different types of robots (additive and multiplicative) in an infinitely lived one-sector aggregative model with malleable capital on wages. The wage effects of these two polar cases are dramatically different. Given malleable capital that can be retrofitted for use either as conventional machines or as robots, we show that when it is profitable for firms to adopt additive robots in the production process, the real wage drops on impact and remains permanently at the lower level even as total malleable capital accumulates. However, when multiplicative robots are adopted, we show that while the immediate impact on the real wage is ambiguous, the real wage enjoys a positive trend growth even in the absence of steady technological progress.