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on Economic Growth |
| By: | Bucci, Alberto; Prettner, Klaus; Saadaoui, Jamel |
| Abstract: | How will the widespread deployment of automation technologies such as industrial robots and artificial intelligence (AI) affect long-run economic performance? To address this question, we develop a model of economic growth for a fully automated economy in which output is produced with only two forms of capital: "traditional capital" (assembly lines, machines, etc.) and "robotic capital" (industrial robots, AI, etc.). In our setting, human labor is no longer competitive, and the central questions become how investment should be allocated across the two types of capital and how the degree of substitutability between them affects long-term economic growth. Using a two- level nested CES production structure (with no further assumptions), we characterize the competitive balanced growth path and the range of feasible long-run growth rates that a fully automated economy can attain. We show that the case of full automation can be consistent with the growth expectations of techno-optimists and the dynamics of economic growth along a balanced growth path depend on preference parameters, depreciation, and the degree of substitutability between robotic and traditional capital in both production and investment decisions. Our framework contributes to the debate on the economic consequences of automation and the extent to which this future is shaped by the underlying forces that determine the accumulation of traditional capital versus robotic capital. |
| Keywords: | Automation; Robots; Capital Accumulation; Substitutability of Capital; Balanced Growth |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:wiw:wus005:80178660 |
| By: | Pintu Parui (Indian Institute of Technology Bombay); Klaus Prettner (Department of Economics, Vienna University of Economics and Business) |
| Abstract: | What policies can foster sustained long-run economic growth? To answer this question, we develop a tractable and unified framework that integrates five strands of research on: (i) the effects of public basic research and private profit-driven applied research on economic growth, (ii) the relationship between health and economic growth, (iii) the education-fertility trade-off and its effect on human capital accumulation, (iv) longevity-induced innovation, and (v) the optimal design of tax and subsidy policies to maximize welfare. We analytically characterize the long-run balanced growth path and employ numerical methods to analyze the transitional dynamics and to compute optimal tax and subsidy schemes. Our findings show that (i) government subsidies for education and health are particularly effective in promoting economic growth and welfare; (ii) current public spending on education, health, basic research, and applied research is typically suboptimal as it falls short of the welfare-maximizing levels; and (iii) endogenizing longevity dampens the growth effects of government subsidies. |
| Keywords: | Endogenous Growth, Innovation-Driven Growth, Public Investment, Fiscal Policy, Education Policy, Health Policy, Research and Development (R&D), Welfare Analysis |
| JEL: | O41 I28 H51 H52 J13 E62 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp396 |
| By: | Yueyuan Ma |
| Abstract: | Using firm-level data from the US Census Longitudinal Business Database (LBD), this paper exhibits novel evidence about a wave of specialization experienced by US firms in the 1980s and 1990s. Specifically: (i) Firms, especially innovating ones, decreased production scope, i.e., the number of industries in which they produce. (ii) Innovation and production separated, with small firms specializing in innovation and large firms in production. Higher patent trading efficiency and stronger patent protection are proposed to explain these phenomena. An endogenous growth model is developed with potential mismatches between innovation and production. Calibrating the model suggests that increased trading efficiency and better patent protection can explain 20% of the observed production scope decrease and 108% of the innovation and production separation. They result in a 0.64 percent point increase in the annual economic growth rate. Empirical analyses provide evidence of causality from pro-patent reforms in the 1980s to the two specialization patterns. |
| Keywords: | specialization, production scope, R&D, intellectual property rights, patent trade, endogenous growth |
| JEL: | E23 L22 O32 O34 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:25-77 |
| By: | Subhrasil Chingri (Indian Institute of Technology Delhi); Debasis Mondal (Indian Institute of Technology Delhi); Klaus Prettner (Department of Economics, Vienna University of Economics and Business) |
| Abstract: | Can human capital accumulation mitigate the adverse effects of automation on the global labor share? To answer this question, we build two theoretical models-first an automation augmented growth model with exogenous human capital to illustrate the general effects of education in the context of automation; and then an automation augmented endogenous human capital accumulation framework in which individuals decide how much of their time they devote to education. We show that while automation puts downward pressure on the labor share, this downward pressure is reduced by human capital investment. Quantitatively, however, the effect of human capital accumulation in limiting the decrease in the labor share is rather small given actual data on the change in the use of industrial robots and in the years of schooling between 1990 and 2024. Achieving a full stabilization of the labor share requires unrealistically high and sustained investments in education. Our findings underscore the importance of education as a policy lever in the age of automation but they also clarify that education policies alone are insufficient given the challenges ahead. |
| Keywords: | Human Capital, Automation, Labor Share, Economic Growth, Neoclassical Growth Model |
| JEL: | J24 O33 O41 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp392 |
| By: | Cainelli, Giulio; Ciccarelli, Carlo; Ganau, Roberto |
| Abstract: | We study how changes in a country’s administrative hierarchy affect development at the city level. We exploit the 1806 Napoleonic administrative reform implemented in the Kingdom of Naples as a historical experiment to assess whether district capitals endowed with supra-municipal administrative functions gained an urban development premium compared with non-capital cities. We find that district capitals recorded a population growth premium throughout the nineteenth century (1828–1911) and experienced higher industrialization both before and after the Italian unification (1861) compared with non-capital cities. We explain our results through mechanisms related to public goods provision and transport network accessibility. |
| JEL: | N0 R14 J01 |
| Date: | 2025–12–23 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130883 |
| By: | Kris Ivanovski; Russell Smyth; Xibin Zhang |
| Abstract: | We examine how human capital influences energy consumption in a panel of OECD nations in the long run. We make important contributions to understanding how education affects energy consumption. First, much of the existing research on how human capital affects energy consumption, employs time series or panel data which typically span a few decades. We utilise a newly assembled long-run panel spanning 150 years, disaggregated by primary, secondary, and tertiary levels, for a core set of OECD countries. This long panel enables us to capture how the human capital–energy relationship evolved through the industrial revolution, multiple energy transitions, and major global shocks. Second, most prior studies rely on parametric models that assume constant relationships over time. Such approaches yield average effects but fail to capture how the education–energy nexus shifts in response to changes in policies, technologies, and macroeconomic conditions. To overcome this limitation, we employ both a parametric and a semi-parametric estimator, which generates time-varying elasticities. Our parametric results highlight the heterogeneous effects of education, with primary and secondary schooling associated with higher energy consumption and tertiary education linked to lower energy consumption. Semi-parametric findings show that primary and secondary education contributed strongly to energy-intensive growth in the early stages of development, but their influence diminished as economies shifted toward services and improved efficiency, while tertiary education became increasingly connected with lower energy use in later decades. |
| Keywords: | human capital, energy consumption, instrument variables, time-varying panel data models |
| JEL: | I25 Q41 Q43 C26 C33 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2026-01 |
| By: | Bishnu, Monisankar; Chingri, Subhrasil; Mondal, Debasis; Prettner, Klaus |
| Abstract: | This paper examines the role of automation in shaping gender inequality among high-skilled and low- skilled workers in the United States. We develop an R&D-based growth model of automation in which we endogenize disparities between men and women and between high-skilled and low-skilled labor through education choices. Automation substitutes for routine, brawn-intensive tasks, while it complements high-skilled, brain-intensive ones. Our framework predicts that automation increases demand for high-skilled workers, raising female participation in knowledge production but also widening within-gender and between-skills inequality. Redistributive transfers to low-skilled workers, financed through robot taxation, reduce high-skilled employment, lower innovation, and slow down economic growth despite compressing within-gender and between-skills inequality. Education subsidies expand the share of skilled workers and foster innovation but come at the cost of greater within-gender and between-skills inequality. Subsidies targeted on women reduce between- gender inequality, but they can raise within-gender inequality and slow down economic growth. Finally, in the case of the presence of norms and institutions that are detrimental to gender equality, female empowerment can reduce inequality and raise economic growth at the same time. |
| Keywords: | Automation; Economic Growth; Education; Gender wage gap; Inequality |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:wiw:wus005:80526059 |
| By: | Monisankar Bishnu (Indian Statistical Institute, Delhi); Subhrasil Chingri (Indian Institute of Technology Delhi); Debasis Mondal (Indian Institute of Technology Delhi); Klaus Prettner (Department of Economics, Vienna University of Economics and Business) |
| Abstract: | This paper examines the role of automation in shaping gender inequality among high-skilled and low-skilled workers in the United States. We develop an R&D-based growth model of automation in which we endogenize disparities between men and women and between high-skilled and low-skilled labor through education choices. Automation substitutes for routine, brawn-intensive tasks, while it complements high-skilled, brain-intensive ones. Our framework predicts that automation increases demand for high-skilled workers, raising female participation in knowledge production but also widening within-gender and between-skills inequality. Redistributive transfers to low-skilled workers, financed through robot taxation, reduce high-skilled employment, lower innovation, and slow down economic growth despite compressing within-gender and between-skills inequality. Education subsidies expand the share of skilled workers and foster innovation but come at the cost of greater within-gender and between-skills inequality. Subsidies targeted on women reduce between-gender inequality, but they can raise within-gender inequality and slow down economic growth. Finally, in the case of the presence of norms and institutions that are detrimental to gender equality, female empowerment can reduce inequality and raise economic growth at the same time. |
| Keywords: | Automation, Economic Growth, Education, Gender wage gap, Inequality |
| JEL: | E2 H2 J7 O3 O4 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp395 |
| By: | Chu, Angus C.; Wang, Xilin |
| Abstract: | This study develops a Malthusian growth model with early state formation and interstate competition. It explores how states' tax capacity and provision of productive public goods shape population dynamics and interstate competition. Each state has an optimal tax rate, increasing in the elasticity of agricultural output with respect to public goods. Without interstate competition, population either converges to a Malthusian trap or grows steadily depending on this elasticity. With interstate competition, states either coexist or only one survives. Population of any surviving state first rises and then falls with its tax rate, capturing the rise and fall of the state. |
| Keywords: | Public goods; interstate competition; Malthusian growth theory |
| JEL: | E60 H20 H56 O43 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126926 |
| By: | Fryderyk Falniowski; El\.zbieta Pli\'s |
| Abstract: | We examine the impact of a change in diversity introduced by a new product on the evolution of an economic system. Modeling Schumpeterian competition as a population game with a unique, attracting, evolutionarily stable state (the Schumpeterian state), in which both innovators and imitators coexist, we examine how the Schumpeterian state evolves depending on the properties of the new product developed by innovators. This way, we demonstrate that the change in diversity is one of the spiritus movens of innovation, influencing the process of creative destruction. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.17365 |
| By: | Talassino, Mauricio Rodrigo; Nicolini, Esteban; Aráoz, María Florencia |
| Abstract: | This paper has two main contributions. The first one is to present a new data set with 360 consistent local geographic units (CLGU henceforth) defined by matching the departments of each population census in Argentina between 1895 and 2022; this structure generates a traceable and transparent connection between the ways in which the information is presented in each census and, hence, it can be a crucial tool to combine information on socioeconomic dimensions across time. The second contribution is the estimation of local indicators of economic activity (LIEA henceforth) for Argentina for 1895 and 1960 and, using the 360 CLGUs, a completely novel exploration of spatialchanges of economic activity and local economic growth in Argentina in the first half of the twentieth century. |
| Keywords: | Regional inequalit; Regional growth; Argentina |
| JEL: | N1 N9 O4 R1 |
| Date: | 2026–01–09 |
| URL: | https://d.repec.org/n?u=RePEc:cte:whrepe:48819 |
| By: | Leonardo Gambacorta; Enisse Kharroubi; Aaron Mehrotra; Tommaso Oliviero |
| Abstract: | This paper investigates whether the positive effects of generative artificial intelligence (gen AI) on growth rate of value added differ across countries in the short run. Using an empirical strategy inspired by Rajan and Zingales (1998) and a dataset covering 56 economies and 16 industries, we find that the differential growth effects arise from variations in sectoral exposure to cognitive and knowledge-intensive activities, differences in production structures, and countries' AI preparedness. Our results suggest that, on average, gen AI is likely to benefit advanced economies more than emerging market economies, thereby widening global income disparities in the near term. |
| Keywords: | generative artificial intelligence, emerging market economies, economic growth; productivity differentials, technological readiness, sectoral exposure to AI |
| JEL: | E24 O47 O57 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1321 |