Growth, Automation, and the Long-Run Share of Labor

We study a model of long run growth and distribution with two key features. First, there is an asymmetry between physical and human capital. Individual claims on the former can be reproduced linearly and indefinitely. Because no similar claim on humans is possible, human capital accumulation instead takes the form of acquiring occupational skills, the returns to which are determined by an endogenous collection of wages. Second, physical capital can take the form of machines that are complementary to human labor, or robots, a substitute for it. Under a self-replication condition on the production of robot services, our theory delivers progressive automation, with the share of labor in national income converging to zero. The displacement of human labor is gradual, and real wages could rise indefinitely. The results extend to endogenous technical change, as well as relaxations of the sharply posited human-physical asymmetry.