Erhan Bayraktar
Abstract
This paper studies how automation changes the stationary distribution of income, consumption, and wealth in an incomplete-market economy. An automating sector trades off productivity gains and labor-cost savings against adoption costs. Households differ by skill and wealth, save in a capital/equity claim, and face uninsurable skill risk. Competitive factor prices and aggregate capital clear jointly with household Hamilton--Jacobi--Bellman equations and the stationary Kolmogorov forward equation. Automation affects consumption through labor-income incidence, precautionary saving, skill mobility, ownership of automation rents, and the stationary capital stock. In an adverse-incidence scenario with high exposure, adverse reskilling, capital obsolescence, and concentrated ownership, decentralized automation lowers stationary consumption and capital relative to the no-automation allocation. With stronger productivity and complementarity, lower obsolescence, and broader ownership, automation raises output, consumption, and capital. Reversing the assumed skill-mobility response also raises consumption, output, and capital substantially at a fixed automation intensity. A proxy diagnostic combining U.S. evidence on AI adoption, investment, labor-income pass-through, equity ownership, and marginal propensities to consume places the current economy near the boundary between the two scenarios. The model provides a quantitative framework for separating automation's aggregate gains from its distributional incidence.