A one-sector model of robotic immiserization

We investigate whether robots raise or lower economic well-being for generations alive during and after their development. While capital that perfectly substitutes for human labor can increase output, it can also lower labor demand and labor’s share of income. Workers who are in retirement after robots are developed benefit from high wages when young and high interest rates when old. Robots crowd out investment in capital that is complementary to workers, lowering wages for those who are working when robots are introduced. A reduction in wages will reduce saving and investment in capital that complements workers, further reducing wages for subsequent generations. On net, this shift to lower wages but higher interest rates can leave future generations worse off. Redistributing income across generations can ensure that a rise in robotic productivity benefits all generations.