Automation and Economic Growth in an Overlapping Generations Model with Bequests

This study investigates whether automation drives economic growth in an overlapping generations (OLG) model with bequests. We revisit whether income transfers from parents to children through bequests can boost economic growth even when automation reduces labor income. We incorporate bequests into an OLG model under four main bequest motives – namely, intergenerational altruism, the warm glow of giving, unintended bequests, and strategic bequests. Focusing on the interior equilibrium in which both traditional and automation capitals are utilized for all periods, we derive the following results. First, when bequest motives are non-strategic, whether long-run economic growth occurs depends heavily on the level of total factor productivity (TFP). If TFP falls below a certain threshold, the economy cannot sustain long-run growth even in the presence of bequests. However, when TFP exceeds this threshold, the economy with bequests can achieve sustained economic growth. Second, when the motive is strategic bequests, economic growth never occurs.