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Robots and humans: The role of fiscal and monetary policies in an endogenous growth model

Year: 2024

Type: article

Abstract: In this paper we develop an endogenous growth model to analyze how fiscal and monetary policies can manage the macroeconomic effects of the robotization process. We consider that unskilled labor can be replaced by robots and that: (i) the government collects tax revenues to invest in social capital and compensate those who lose their jobs; (ii) there is monetary policy with cash-in-advance restrictions; (iii) social capital contributes to increasing technological-knowledge progress. Our results confirm that robotization stimulates economic growth, but contributes to widening wage inequality between skilled and unskilled workers. We show that, under specific circumstances, an expansionary monetary policy or a more progressive taxation can attenuate such widening effect. We also show that public investment in social capital and public transfers to those who lose their jobs play a crucial role in attenuating the negative consequences of rising unemployment caused by robotization.

Source: Mathematical Social Sciences

DOI: 10.1016/j.mathsocsci.2024.11.005

Authors: Óscar Afonso, Elena Sochirca, Pedro Cunha Neves

Institution: Universidade do Porto

Language: English

Topic: Economic Growth and Productivity

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Decent work and economic growth, No poverty

Open Access status: hybrid

Estimated APC paid: $2,720