The rise of the 1% and the fall of the labor share : an automation-driven doom loop?

I evaluate the link between automation and the rise in top income concentration when inequality matters for macro. The novel mechanism is that automation redistributes income towards high-wealth households who save more, which lowers the interest rate and incites firms to automate more. To operationalize this, I build a tractable heterogeneous-agent model (1) with wealth in the utility function as a luxury good, and (2) a firm-side choice on automation. I find that introducing realistic savings rate heterogeneity largely eliminates the need for ad hoc technology shifts. Rather, automation is the outcome of increased top income concentration, not just its driver.