Abstract

This paper presents a new framework for analysing robotics, AI and high-tech, which differs from the canonical model of technological progress by incorporating the higher education system. The main difference is that there is not just one type of skilled workers, but two types, and there is not one type of education but two - either elites universities or standard ones. The signaling on the type of workers is revealed by a qualification exam to enter the elite universities.

The duality in the higher-education sector enables a separation of individuals by their abilities, and in consequence, human capital in both industries is different. We define inequality as the wage premium between workers in high-tech and low-tech industries. We show that robots and AI affect the “enhancement effect” of education in elite universities, and in consequence, inequality increases.

In other words, the wage and productivity gaps between high-tech and low-tech sectors are fueled by the duality in higher education, leading to heterogeneity in human capital. In consequence, while in regular models, robots might lead to convergence of workers productivity, and therefore to a reduction in wage inequality, in this model, inequality will increase.

This paper exposes a new trade-off in economics: a trade-off between inequality and leadership in technology. This paper shows that a country with high level of elitism has high level of inequality but will also be a country with leadership in science and engineering technology.

Keywords: ability, skills, productivity, duality, higher education, robots, wage premium, international leadership