, Capital, Consumption, and Savings 9 Transition. Factor Prices and Labor Shares 10 Transition with Closed and Open Capital Accounts (σ = 3) 11 Steady State Comparison (percent changes with respect to initial steady state) 12 Moments in the Initial Steady State 13 Steady State Comparison (percent changes with respect to initial steady state) A.1 Real Wages and Robot Density List of Tables 1 Calibration of One-Sector Model 2 Calibration for Two-Labor Model 3 Percent Change in per-capita GDP following Increase in Robot Productivity 4 Calibration
. We can then examine the implications of an increase in robot productivity for inequality within and between each region, both in the long run and during the transition. Even this limited experiment turns out to make some powerful points about the likelihood of divergence arising from this wave of technology, as well as disentangling and clarifying many of the stories in the qualitative literature. 7 The only frictions in our simple model are labor and (in some variants) capital immobility. Thus, the improvement in “robot” technology we posit is welfare
or complements. If they are substitutes, an increase in robot productivity leads to a divergence in per capita GDP in favor of advanced economies-where it is more profitable to invest in robots because wages are relatively high. The labor share declines in both regions. However, if labor and robots are complementary, greater robot productivity helps sub-Saharan Africa-where it is more profitable to invest in robots combined with relatively cheap labor-progress toward convergence of per capita GDP with advanced economies. The labor share increases in both regions
set of tasks that can be performed by machines. Berg, Buffie, and Zanna (2018) also recognize that automation may substitute directly for labor, and model technological change as an increase in robot productivity where robots are treated as a separate input in the production function. Focusing on advanced economies, they find that the more easily robots substitute for workers, the higher the increase in GDP per capita and the greater the decrease in labor share, leading to a richer economy, but with more inequality. We extend the framework in Berg, Buffie, and