Some Simple Macroeconomics of Artificial Intelligence and Automatic Investments – A User's Guide

This paper develops a simple macroeconomic framework to analyze and assess the consequences of automation investments for wages, the functional income distribution, consumption per capita, output per worker, and economic growth. On the production side, tasks must be performed to produce output. Automation investments in the form of new machines partly replace human labor in the performance of these tasks. On the household side, workers are endowed with a utility function proposed by Boppart and Krusell (2016). Accordingly, the individual labor supply may either increase or decrease in response to a wage hike. Finally, I analyze the consequences of improvements in the automation technology itself. Important findings include that automation investments may increase the aggregate demand for labor if the implied growth of labor productivity is sufficiently large.