Title

Computer Technology, Human Labor, and Long-Run Economic Growth

Date of Original Version

1998

Type

Working Paper

Abstract or Description

Over the coming century, computer technology is likely to become capable of reproducing many of the skills now performed by human labor. This paper describes three models of the aggregate economic changes that occur when capital becomes capable of performing human work skills. The basic model, with a single sector and homogeneous labor, projects output growth rates over the next few decades that are substantially above historical growth rates in industrialized countries, assuming plausible increases in computer skill. The projected output growth is accompanied by structural changes reflecting the reduced role of labor, with wage growth lagging output growth and the labor share of output decreasing. Resource limits do not substantially affect the levels of output and wage growth in the near future. The 2-type model, with fixed skill differences between different workers, produces similar growth in output and average wages over the next several decades. However, the worker skill differences produce large increases in wage inequality between types of workers. The 2-sector model, with different skill requirements for different economic sectors, also produces similar growth in output and wages over the next several decades. For the three models, asymptotic growth in output and wages is substantially reduced by resource limits, worker skill differences, and sector skill differences, even though those constraints do not substantially reduce growth over the next few decades. The models produce patterns of change in the labor share and capital-output ratio that are consistent with broad trends in economic data.