--- title: "2023 KLEIN LECTURE—CAPITAL AND WAGES · AI Fault Line" url: https://aifaultline.com/research/p/doi-10-1111-iere-12733/ description: "AI Fault Line is a neutral, evidence-cited field guide to why experts looking at the same developments disagree about AI's effect on productivity, jobs, inequality, regulation and the pace of change." --- [Research](https://aifaultline.com/research/) # 2023 KLEIN LECTURE—CAPITAL AND WAGES [Daron Acemoğlu](https://aifaultline.com/authors/daron-acemoglu/) · International Economic Review · 13 Sep 2024 [Read original source](https://doi.org/10.1111/iere.12733) Open access Where this sits in the debate - [Will AI destroy more jobs than it creates?](https://aifaultline.com/debate/jobs/) - [Will AI widen inequality?](https://aifaultline.com/debate/inequality/) Direction of the finding as read from the abstract by an AI model ([AI-written](https://aifaultline.com/about/)). ## Abstract Abstract Does capital accumulation increase labor demand and wages? Neoclassical production functions, where capital and labor are q‐complements, ensure that the answer is yes, so long as labor markets are competitive. This result critically depends on the assumption that capital accumulation does not change the technologies being developed and used. I adapt the theory of endogenous technological change to investigate this question when technology also responds to capital accumulation. I show that there are strong parallels between the relationship between capital and wages and existing results on the conditions under which equilibrium factor demands are upward‐sloping (e.g., Acemoglu, Econometrica 75(5) (2007), 1371–410). Extending this framework, I provide intuitive conditions and simple examples where a greater capital stock leads to lower wages, because it triggers more automation. I then offer an endogenous growth model with a menu of technologies where equilibrium involves choices over both the extent of automation and the rate of growth of labor‐augmenting productivity. In this framework, capital accumulation and technological change in the long run are associated with wage growth, but an increase in the saving rate increases the extent of automation, and initially reduces the wage rate and can subsequently depress its long‐run growth rate. ## About this publication **Leading field journal.** A leading journal in economics or a neighbouring field (on the Tinbergen Institute’s A list or near the top of the RePEc ranking), or a top-rated computer-science venue. Placed by: Tinbergen Institute A list. [How sources are ranked](https://aifaultline.com/about/#source-ranking). Published 2024 (26 months ago) Citations 6 (OpenAlex) ## Citations in context [Chart: 6 citations, cohort median 47] 6 citations — 13th percentile among the 23 indexed papers from 2024 in this collection. Citation counts favor older papers; this compares only same-year papers here, not the whole literature. [Chart: published 2024] □ added to this collection in 2026. Daron Acemoglu signed the wemustactnow.ai letter · author affiliation matches seed institution massachusetts institute of technology — part of why this paper is in the collection. ## More on this topic Related by theme, not necessarily by method or conclusion. - [The Effects of Generative AI on High Skilled Work: Evidence from Three Field Experiments with Software Developers](https://aifaultline.com/research/p/doi-10-2139-ssrn-4945566/) SSRN · 2024 - [GPTs are GPTs: An Early Look at the Labor Market Impact Potential of Large Language Models](https://aifaultline.com/research/p/doi-10-48550-arxiv-2303-10130/) arXiv · 2023 - [Extending “GPTs Are GPTs” to Firms](https://aifaultline.com/research/p/doi-10-1257-pandp-20251045/) AEA Papers and Proceedings · 2025 - [New Frontiers: The Origins and Content of New Work, 1940–2018](https://aifaultline.com/research/p/doi-10-1093-qje-qjae008/) The Quarterly Journal of Economics · 2024 Overview assembled automatically from collected metadata. [How this site is built](https://aifaultline.com/about/).