How demography shapes the macroeconomic returns to automation

Abstract

This paper investigates how demographic change interacts with automation to shape long-term macroeconomic outcomes. Using a calibrated general equilibrium model with heterogeneous labor and capital, we simulate five OECD countries with diverse demographic and technological profiles: Republic of Korea, Australia, Italy, Hungary, and Türkiye. Our model replicates key findings from the literature, including the positive relationship between aging and robot accumulation, as well as the growing capital income share at the expense of the labor income share. Beyond these, we uncover several novel insights. First, robot accumulation is driven more by the share of high-skilled labor and production technology than by declining interest rates. Second, while aging initially boosts robotization, this growth is ultimately constrained by the shrinking pool of high-income contributors. Third, only countries with low initial consumption and production relying on low-skilled labor avoid declines in per capita income. Fourth, robotization often replaces rather than expands capital. Fifth, wage convergence between high- and low-skilled workers emerges as a consequence of automation. Finally, increasing general educational attainment does not necessarily raise per capita GDP growth in aging societies undergoing automation. These findings highlight the importance of labor market structure and technological composition in mediating the macroeconomic effects of automation during demographic transitions.