Hostname: page-component-65f69f4695-bd75b Total loading time: 0 Render date: 2025-06-29T07:12:48.634Z Has data issue: false hasContentIssue false
  • English
  • Français

Demographic change, secular stagnation, and inequality: automation as a blessing?

Published online by Cambridge University Press:  18 September 2024

Arthur Jacobs Open the ORCID record for Arthur Jacobs [Opens in a new window]  and
Freddy Heylen
Arthur Jacobs*
Affiliation:
Department of Economics, Ghent University, Ghent, Belgium
Freddy Heylen
Affiliation:
Department of Economics, Ghent University, Ghent, Belgium
*
Corresponding author: Arthur Jacobs; Email: arthur.jacobs@ugent.be
Get access

Abstract

We study whether the increased adoption of available automation technologies allows economies to avoid the negative effect of aging on per capita output. We develop a quantitative theory in which firms choose to which extent they automate in response to a declining workforce and rising old-age dependency. An important element in our model is the integration of two capital types: automation capital that acts as a substitute to human labor, and traditional capital that is a complement to labor. Empirically, our model's predictions largely match data regarding automation (robotization) density across OECD countries. Simulating the model, we find that aging-induced automation only partially compensates the negative growth effect of aging in the absence of technical progress in automation technology. One reason is that automated tasks are no perfect substitutes for non-automated tasks. A second reason is that automation raises the interest rate and thus inhibits positive behavioral reactions to aging (later retirement and investment in human capital). Moreover, increased automation generates a falling net labor share of income and rising welfare inequality. We evaluate alternative policy responses to cope with this inequality.

Keywords

automationdemographic changesecular stagnationoverlapping generations modelroboticsfactor sharesJ11J23J31O41

Information

Type
Research Paper
Information
Journal of Demographic Economics , First View , pp. 1 - 41
Copyright
Copyright © The Author(s), 2024. Published by Cambridge University Press in association with Université catholique de Louvain

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

Abeliansky, A. L., & Prettner, K. (2023). Automation and population growth: theory and cross-country evidence. Journal of Economic Behavior & Organization, 208, 345–358. https://doi.org/10.1016/j.jebo.2023.02.006CrossRefGoogle Scholar
Acemoglu, D., & Restrepo, P. (2017). Secular stagnation? The effect of aging on economic growth in the age of automation. American Economic Review, 107(5), 174–179. https://doi.org/10.1257/aer.p20171101CrossRefGoogle Scholar
Acemoglu, D., & Restrepo, P. (2018a). The race between man and machine: implications of technology for growth, factor shares, and employment. American Economic Review, 108(6), 1488–1542. https://doi.org/10.1257/aer.20160696CrossRefGoogle Scholar
Acemoglu, D., & Restrepo, P. (2018b). Modeling automation. AEA Papers and Proceedings, 108, 48–53. https://doi.org/10.1257/pandp.20181020CrossRefGoogle Scholar
Acemoglu, D., & Restrepo, P. (2019). Artificial intelligence, automation, and work. In Agrawal, A., Gans, J., & Goldfard, A. (Eds.), The economics of artificial intelligence (pp. 197–236). Chicago: University of Chicago Press, Ch. 8. https://doi.org/10.7208/chicago/9780226613475.001.0001CrossRefGoogle Scholar
Acemoglu, D., & Restrepo, P. (2020). Robots and jobs: evidence from US labor markets. Journal of Political Economy, 128(6), 2188–2244. https://doi.org/10.1086/705716CrossRefGoogle Scholar
Acemoglu, D., & Restrepo, P. (2022). Demographics and automation. The Review of Economic Studies, 89(1), 1–44. https://doi.org/10.1093/restud/rdab031CrossRefGoogle Scholar
Adjemian, S., Bastani, H., Juillard, M., Karamé, F., Maih, J., Mihoubi, F., Mutschler, W., Perendia, G., Pfeifer, J., Ratto, M., & Villemot, S. (2011). Dynare: Reference Manual – Version 4. Dynare Working Papers.Google Scholar
Aksoy, Y., Basso, H. S., Smith, R. P., & Grasl, T. (2019). Demographic structure and macroeconomic trends. American Economic Journal: Macroeconomics, 11(1), 193–222. https://doi.org/10.1257/mac.20170114Google Scholar
Arntz, M., Terry, G., & Ulrich, Z. (2016). The Risk of Automation for Jobs in OECD Countries. OECD Social, Employment, and Migration Paper, N° 189. https://doi.org/10.1787/5jlz9h56dvq7-enCrossRefGoogle Scholar
Basso, H. S., & Jimeno, J. F. (2021). From secular stagnation to robocalypse? Implications of demographic and technological changes. Journal of Monetary Economics, 117, 833–847. https://doi.org/10.1016/j.jmoneco.2020.06.004CrossRefGoogle Scholar
Bergholt, D., Furlanetto, F., & Maffei-Faccioli, N. (2022). The decline of the labor share: new empirical evidence. American Economic Journal: Macroeconomics, 14(3), 163–198. https://doi.org/10.1257/mac.20190365Google Scholar
Bloom, D. E., Canning, D., & Fink, G. (2010). Implications of population ageing for economic growth. Oxford Review of Economic Policy, 26(4), 583–612. https://doi.org/10.1093/oxrep/grq038CrossRefGoogle Scholar
Boone, B., & Heylen, F. (2019). Cross-country differences in unemployment: fiscal policy, unions, and household preferences in general equilibrium. The Scandinavian Journal of Economics, 121(3), 1270–1302. https://doi.org/10.1111/sjoe.12302CrossRefGoogle Scholar
Bouzahzah, M., de la Croix, D., & Docquier, F. (2002). Policy reforms and growth in computational OLG economies. Journal of Economic Dynamics and Control, 26(12), 2093–2113. https://doi.org/10.1016/S0165-1889(01)00023-9CrossRefGoogle Scholar
Buyse, T., Heylen, F., & Van de Kerckhove, R. (2017). Pension reform in an OLG model with heterogeneous abilities. Journal of Pension Economics & Finance, 16(2), 144–172. https://doi.org/10.1017/S1474747215000281CrossRefGoogle Scholar
Carvalho, C., Ferrero, A., & Nechio, F. (2016). Demographics and real interest rates: inspecting the mechanism. European Economic Review, 88, 208–226. https://doi.org/10.1016/j.euroecorev.2016.04.002CrossRefGoogle Scholar
Caselli, F., & Coleman, W. J. II (2006). The world technology frontier. American Economic Review, 96(3), 499–522. https://doi.org/10.1257/aer.96.3.499CrossRefGoogle Scholar
Cervellati, M., & Sunde, U. (2013). Life expectancy, schooling, and lifetime labor supply: theory and evidence revisited. Econometrica, 81(5), 2055–2086. https://doi.org/10.3982/ECTA11169Google Scholar
Cords, D., & Prettner, K. (2022). Technological unemployment revisited: automation in a search and matching framework. Oxford Economic Papers, 74(1), 115–135.CrossRefGoogle Scholar
Dao, M. C., Das, M. M., Koczan, Z., & Lian, W. (2017). Why is labour receiving a smaller share of global income? Theory and empirical evidence. IMF Working Paper Series, N° 169.CrossRefGoogle Scholar
Dauth, W., Findeisen, S., Südekum, J., & Woessner, N. (2017). German Robots – The Impact of Industrial Robots on Workers. CEPR Discussion Paper, N° DP12306.Google Scholar
DeCanio, S. J. (2016). Robots and humans – complements or substitutes? Journal of Macroeconomics, 49, 280–291. https://doi.org/10.1016/j.jmacro.2016.08.003CrossRefGoogle Scholar
de la Croix, D., Pierrard, O., & Sneessens, H. R. (2013). Aging and pensions in general equilibrium: labor market imperfections matter. Journal of Economic Dynamics and Control, 37(1), 104–124. https://doi.org/10.1016/j.jedc.2012.06.011CrossRefGoogle Scholar
Devriendt, W., & Heylen, F. (2020). Macroeconomic and distributional effects of demographic change in an open economy – the case of Belgium. Journal of Demographic Economics, 86(1), 87–124. https://doi.org/10.1017/dem.2019.14CrossRefGoogle Scholar
Docquier, F., & Paddison, O. (2003). Social security benefit rules, growth and inequality. Journal of Macroeconomics, 25(1), 47–71. https://doi.org/10.1016/S0164-0704(03)00006-5CrossRefGoogle Scholar
Duval, R. (2003). The retirement effects of old-age pension and early retirement schemes in OECD countries. OECD Economics Department Working Papers No. 370.Google Scholar
Eggertsson, G. B., Mehrotra, N. R., & Robbins, J. A. (2019). A model of secular stagnation: theory and quantitative evaluation. American Economic Journal: Macroeconomics, 11(1), 1–48. https://doi.org/10.1257/mac.20170367Google Scholar
Fiorito, R., & Zanella, G. (2012). The anatomy of the aggregate labor supply elasticity. Review of Economic Dynamics, 15(2), 171–187. https://doi.org/10.1016/j.red.2012.01.002CrossRefGoogle Scholar
Frey, C. B. (2019). The technology trap: Capital, labor, and power in the age of automation. Princeton: Princeton University Press.Google Scholar
Frey, C. B., & Osborne, M. A. (2017). The future of employment: how susceptible are jobs to computerisation? Technological Forecasting and Social Change, 114, 254–280. https://doi.org/10.1016/j.techfore.2016.08.019CrossRefGoogle Scholar
Gagnon, E., Johannsen, B. K., & Lopez-Salido, D. (2021). Understanding the new normal: the role of demographics. IMF Economic Review, 69, 357–390. https://doi.org/10.1057/s41308-021-00138-4CrossRefGoogle Scholar
Gollin, D. (2002). Getting income shares right. Journal of Political Economy, 110(2), 458–474. https://doi.org/10.1086/338747CrossRefGoogle Scholar
Gordon, R. J. (2016). The rise and fall of American growth. Princeton: Princeton University Press. https://doi.org/10.1515/9781400873302CrossRefGoogle Scholar
Guo, J. T., & Lansing, K. J. (1998). Indeterminacy and stabilization policy. Journal of Economic Theory, 82(2), 482–490. https://doi.org/10.1006/jeth.1997.2446CrossRefGoogle Scholar
Gutiérrez, G. (2017). Investigating global labor and profit shares. NYU Working Paper. https://doi.org/10.2139/ssrn.3040853CrossRefGoogle Scholar
Gutiérrez, G., & Piton, S. (2020). Revisiting the global decline of the (non-housing) labor share. American Economic Review: Insights, 2(3), 321–338. https://doi.org/10.1257/aeri.20190285Google Scholar
Harding, M. (2013). Taxation of dividend, interest, and capital gain income. OECD Centre for Tax Policy and Administration Working Paper.Google Scholar
Heer, B., & Irmen, A. (2014). Population, pensions, and endogenous economic growth. Journal of Economic Dynamics and Control, 46, 50–72.CrossRefGoogle Scholar
Heijdra, B. J., & Reijnders, L. S. (2018). Longevity shocks with age-dependent productivity growth. Journal of Pension Economics & Finance, 17(2), 200–230. https://doi.org/10.1017/S147474721600024XCrossRefGoogle Scholar
Heijdra, B. J., & Romp, W. E. (2009). Human capital formation and macroeconomic performance in an ageing small open economy. Journal of Economic Dynamics and Control, 33(3), 725–744. https://doi.org/10.1016/j.jedc.2008.09.003CrossRefGoogle Scholar
Human Mortality Database. Max Planck Institute for Demographic Research (Germany), University of California, Berkeley (USA), and French Institute for Demographic Studies (France). Available at www.mortality.orgGoogle Scholar
International Federation of Robotics. (2021). World Robotics 2021 – Industrial Robots.Google Scholar
Irmen, A. (2021). Automation, growth, and factor shares in the era of population aging. Journal of Economic Growth, 26(4), 415–453. https://doi.org/10.1007/s10887-021-09195-wCrossRefGoogle Scholar
Johnson, D. G. (1954). The functional distribution of income in the United States, 1850–1952. The Review of Economics and Statistics, 36(2), 175–182. https://doi.org/10.2307/1924668CrossRefGoogle Scholar
Kaldor, N. (1961). Capital accumulation and economic growth. In Lutz, F. A. & Hague, D. C. (Eds.), The theory of capital (pp. 177–222). London: Palgrave Macmillan. https://doi.org/10.1007/978-1-349-08452-4_10CrossRefGoogle Scholar
Karabarbounis, L., & Neiman, B. (2012). Declining labor shares and the global rise of corporate saving. NBER Working Paper, National Bureau of Economic Research, N° 18154. https://doi.org/10.3386/w18154CrossRefGoogle Scholar
Karabarbounis, L., & Neiman, B. (2014). The global decline of the labor share. The Quarterly Journal of Economics, 129(1), 61–103. https://doi.org/10.1093/qje/qjt032CrossRefGoogle Scholar
Keynes, J. M. (1939). Relative movements of real wages and output. The Economic Journal, 49(193), 34–51. https://doi.org/10.2307/2225182CrossRefGoogle Scholar
Lankisch, C., Prettner, K., & Prskawetz, A. (2019). How can robots affect wage inequality? Economic Modelling, 81, 161–169. https://doi.org/10.1016/j.econmod.2018.12.015CrossRefGoogle Scholar
Ludwig, A., Schelkle, T., & Vogel, E. (2012). Demographic change, human capital and welfare. Review of Economic Dynamics, 15(1), 94–107. https://doi.org/10.1016/j.red.2011.07.001CrossRefGoogle Scholar
Manyika, J., Mischke, J., Bughin, J., Woetzel, J., Krishnan, M., & Cudre, S. (2019). A new look at the declining labor share of income in the United States. McKinsey Global Institute Discussion paper.Google Scholar
Martens, B., & Tolan, S. (2018). Will this time be different? A review of the literature on the Impact of Artificial Intelligence on Employment, Incomes and Growth. JRC Working Papers on Digital Economy. https://doi.org/10.2139/ssrn.3290708CrossRefGoogle Scholar
OECD. (2012). Economic Policy Reforms 2012: Going for Growth – Chapter 3. OECD Economic Policy Reforms. https://doi.org/10.1787/growth-2012-graph57-enCrossRefGoogle Scholar
Palivos, T., & Karagiannis, G. (2010). The elasticity of substitution as an engine of growth. Macroeconomic Dynamics, 14(5), 617–628.CrossRefGoogle Scholar
Popescu, G. H., Petrescu, I. E., Sabie, O. M., & Muşat, M. (2018). Labor-displacing technological change and worldwide economic insecurity: how automation and the creation of innovative tasks shape inequality. Psychosociological Issues in Human Resource Management, 6(2), 80–85. https://doi.org/10.22381/PIHRM6220188Google Scholar
Prettner, K., & Strulik, H. (2020). Innovation, automation, and inequality: policy challenges in the race against the machine. Journal of Monetary Economics, 116, 249–265. https://doi.org/10.1016/j.jmoneco.2019.10.012CrossRefGoogle Scholar
Rachel, Ł., & Summers, L. H. (2019). On secular stagnation in the industrialized world, Brookings Papers on Economic Activity, Spring, 1–54. https://doi.org/10.3386/w26198CrossRefGoogle Scholar
Rogerson, R. (2007). Taxation and market work: is Scandinavia an outlier? Economic Theory, 32(1), 59–85. https://doi.org/10.1007/s00199-006-0164-9CrossRefGoogle Scholar
Rogerson, R., & Wallenius, J. (2009). Micro and macro elasticities in a life cycle model with taxes. Journal of Economic Theory, 144(6), 2277–2292. https://doi.org/10.1016/j.jet.2008.05.011CrossRefGoogle Scholar
Rognlie, M. (2014). A note on Piketty and diminishing returns to capital. Unpublished manuscript. MIT. Retrieved from: http://gesd.free.fr/rognlie14.pdfGoogle Scholar
Santini, T. (2022). Automation with heterogeneous agents: the effect on consumption inequality. Halle Institute for Economic Research Discussion Papers, 28/2022.Google Scholar
Stähler, N. (2021). The impact of aging and automation on the macroeconomy and inequality. Journal of Macroeconomics, 67, 103278.CrossRefGoogle Scholar
Zhang, X., Palivos, T., & Liu, X. (2022). Aging and automation in economies with search frictions. Journal of Population Economics, 35(2), 621–642. https://doi.org/10.1007/s00148-021-00860-3CrossRefGoogle Scholar
Supplementary material: File

Jacobs and Heylen supplementary material

Jacobs and Heylen supplementary material
Download Jacobs and Heylen supplementary material(File)
File 10 MB