Simulating Endogenous Global Automation
This paper develops a 17-region, 3-skill group, overlapping generations, computable general equilibrium model to evaluate the global consequences of automation. Automation, modeled as capital- and high-skill biased technological change, is endogenous with regions adopting new technologies when profitable. Our approach captures and quantifies key macro implications of a range of foundational models of automation. In our baseline scenario, automation has a moderate effect on regional outputs and a small effect on world interest rates. However, it has a major impact on inequality, both wage inequality within regions and per capita GDP inequality across regions. We examine two policy responses to technological change -- mandating use of the advanced technology and providing universal basic income to share gains from automation. The former policy can raise a region's output, but at a welfare cost. The latter policy can transform automation into a win-win for all generations in a region.
We thank the Alfred P. Sloan Foundation, the Gaidar Institute, and Boston University for research support. We also thank Daniel Rock, Pascual Restrepo, and Sarah Bana for very helpful comments and providing key data. Andrey Zubarev, Kristina Nesterova, and Rodrigo Razo provided crucial analytical assistance. And we thank Ulrich Muller, James Stock, and Mark Watson for providing critical region-specific productivity-growth estimates. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research or the Inter-American Development Bank.