On the one hand, people are afraid that robots will take away our jobs and that the future will be characterized by mass unemployment. On the other hand, we read in the newspaper every day about the population aging and labor shortages. How can we explain these seemingly contradictory fears?

Fewer workers lead to more automation

Klaus Prettner and Ana Lucia Abeliansky of the WU Department of Economics show in a new study that demographic change is a key driver of automation. Countries with particularly low population growth simultaneously have the highest density of industrial robots per worker. Every one percent decline in population growth increases robot density growth by two percent. So, in a sense, the labor shortage provides the higher investment in automation, which in turn is necessary to at least partially compensate for the labor shortage. Automation thus contributes to the solution of a problem, at least in this dimension, and should therefore not be seen per se as a problem itself.

New theoretical approach

To explain these empirical results, the researchers propose a simple theoretical framework for production in the age of automation and apply it to countries facing declining population growth. In their model, they introduce automation as a new factor of production that resembles the characteristics of labor in the production process, but the corresponding robots, 3D printers, and smart algorithms are owned by capital owners. In this framework, lower population growth strengthens the incentive to invest in automation.

Political implications

Countries facing significant demographic challenges will be the first to invent and adopt new automation technologies. This, in turn, could help them overcome some of the negative effects that declining population growth and demographic change mean for economic prosperity.

About Klaus Prettner

Klaus Prettner is a professor of economics at WU. He habilitated in Mathematical Economics at the Vienna University of Technology in 2014 and received a PhD in Economics from the University of Vienna in 2009.

Klaus Prettner has published in journals such as the Journal of Monetary Economics, The Economic Journal, Journal of Economic Literature, European Economic Review, Journal of Economic Growth, Research Policy, The BMJ and the Journal of Health Economics. His research has won the Young Economist Award from the National Economic Society twice. He received the EPAINOS Award from the European Regional Science Association and a Best Paper Award from the Faculty of Mathematics and Geoinformation at the Vienna University of Technology.

Klaus Prettner's research focuses on the macroeconomic effects of automation and digitalization.

Researcher of the Month

With the Researcher of the Month series, WU presents outstanding work by researchers who have made important contributions to solving key economic, social, and legal issues. Our monthly Researcher of the Month video provides insights into the work of our researchers and offers glimpses behind the scenes of WU’s diverse research activities.

Weiterführende Informationen

Video: Klaus Prettner and his research

Ana Lucia Abeliansky, Klaus Prettner: Population Growth and Automation Density: Theory and Cross-Country Evidence, abrufbar unter https://research.wu.ac.at/files/19013426/wp315.pdf