Umeå Economic Studies,
Umeå University, Department of Economics

Abstract: We analyze the impact of increased automation on the size and distribution of pension benefits, as well as on the optimal size and design of public pension systems. To this end, we build an overlapping generations model of a closed economy with heterogeneous agents who make decisions regarding skill formation, consumption, savings, and retirement. Automation is conceptualized either in terms of capital-skill complementarity or in a task-based fashion. We find that any productivity gains from automation, realized as increased capital returns, disproportionately benefit high-skilled workers who are less dependent on illiquid public pensions. A redistributive pension system can reduce public pension inequality but may increase inequality in private retirement savings. In our calibrated economy, the optimal size of the pension system is larger in the task-based specification, where the displacement effects of automation are accounted for.

Keywords: Automation; General Equilibrium; Overlapping Generations; Public Pensions

JEL-codes: H55; J22; J26

Language: English

61 pages, June 13, 2025

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