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New publication: The implications of automation for economic growth when investment decisions are irreversible

A new article on economic growth in the context of the increasing automation of production processes by Torben Klarl has appeared in the renowned journal “Economics Letters”. With his co-author, he presents a growth model that assumes irreversibility in the investment decision capital vs. automation capital (robots, 3D printers etc.). Thus, the model is, on the one hand, able to explain dynamics of adaptation to long-term equilibrium, and, on the other hand, the authors identify an inequality effect between the growth rate of production and the ratio of automation capital to capital, which is the greater the further away from long-term equilibrium. Furthermore, the authors show that continuous growth is possible even if the exogenous technological progress assumed in the model is zero. This is because the property of decreasing marginal returns of capital is just canceled out by the substitution of labor by automation capital.

The article is an important contribution to the project “Energy system transformation, digitalization, and labor market: Effects on growth and distribution” of the Diginomics Research Group.

This article is also available as Discussion Paper #1903 in the series of Bremen Papers on Economics & Innovation of the Institute for economic research and policy (ierp).

Link to the discussion paper: