Automation and Welfare: The Role of Bequests and Education

IMF Working Papers, January 12, 2024

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This paper examines the welfare effects of automation in neoclassical growth models with and without intergenerational transfers.
In a standard overlapping generations model without intergenerational transfers:
- Improvements in automation technologies that would lower welfare can be mitigated by shifts in labor supply related to demographics or pandemics.
With perfect intergenerational transfers based on altruism:
- Automation could raise the well-being of all generations.
With imperfect altruism:
- Fiscal transfers (universal basic income) and public policies to expand access to education opportunities can alleviate much of the negative effect of automation.

Improvements in automation technologies may lower welfare in baseline overlapping generations frameworks without transfers.
Demographic- or pandemic-related shifts in labor supply can mitigate welfare losses from automation in models without transfers.
Perfect altruistic intergenerational transfers can convert automation into a welfare-improving force for all generations.
Under imperfect altruism, targeted public interventions can substantially reduce adverse welfare impacts:
- Fiscal transfers such as universal basic income.
- Public policies to expand access to education opportunities.

Consider fiscal transfers (universal basic income) when altruistic bequest links are imperfect to offset automation-induced welfare losses.
Expand access to education opportunities through public policy to alleviate negative effects of automation on welfare.
Recognize the role of demographic and pandemic-driven labor supply shifts as potential mitigants in models without intergenerational transfers.

Authors: Manuk Ghazanchyan, Alexei Goumilevski, Alex Mourmouras
Publication date: January 12, 2024
Series: Working Paper No. 2024/011
Issue: 011
Volume: 2024
Pages: 41
DOI: https://doi.org/10.5089/9798400263026.001
Stock No: WPIEA2024011
ISBN: 9798400263026
ISSN: 1018-5941
Subject: Automation, Consumption, Education, Human capital, Income, Labor, National accounts, Technology
Keywords: Aging, Altruism, appendix B. Replicating Kotlikoff, Automation, automation technology, Consumption, Education, Fiscal Policy, Global, Human capital, IMF working papers, Income, Overlapping Generations, production function, S model, welfare effect

IMF Working Papers — "Automation and Welfare: The Role of Bequests and Education", January 12, 2024.