1 Introduction 2

2 The growth model 5

  2.1 Technology 6

  2.2 Automation dynamics 7

  2.3 Households 8

  2.4 Rents 9

  2.5 Innovation 11

3 Growth and bottlenecks 13

  3.1 The balanced growth path 13

  3.2 Steady-state automation 16

  3.3 Transition 19

4 Simulation 21

  4.1 Calibration 21

  4.2 Scenarios 24

5 The AI debate 31

  5.1 Comparison of growth scenarios 32

  5.2 Labour market and income redistribution 33

  5.3 Monetary policy implications 35

  5.4 Broader policy implications 37

6 Conclusion 38

Appendix A: Microfoundation 39

  A.1 Aggregate production function 39

  A.2 Firms’ automation decision 40

  A.3 Innovators’ choice of rent base 41

Appendix B: Robustness 43

  B.1 Perfect foresight 43

  B.2 Transformative AI with and without the demand bottleneck 45

  B.3 Alternative parameters 47

Appendix C: Extensions 49

  C.1 AI lowering research costs 49

  C.2 Automated research 51