How Does Automation Affect Economic Growth and Income Distribution in a Two-Class Economy?

This study uses a growth model with automation technology to consider two classes---workers and capitalists---and investigates how advances in automation technology affect economic growth and income distribution. In addition to the two production factors labor and traditional capital, we consider automation capital as the third production factor. We also introduce Pasinetti-type saving functions into the model to investigate how the difference between the capitalists' and workers' saving rates affect economic growth and income distribution. When the capitalists' saving rate is higher than a threshold level, per capita output exhibits endogenous growth irrespective of the workers' savings rate. In this case, the income gap between workers and capitalists widens over time. When the capitalists' saving rate is less than the threshold level, two different long-run states occur depending on the workers' saving rate: the capitalists' own automation capital share approaches a constant, and it approaches zero. In both cases, the per capita output growth is zero and the income gap between the two classes becomes constant over time.