Abstract
Using a quantitative model that features technical progress in automation and endogenous skill choice, we show that, given the current U.S. tax system, a sustained fall in automation costs can lead to a massive rise in income inequality. We characterize the optimal tax system in this model. We find that it is optimal to tax robots while the current generations of routine workers, who can no longer move to non-routine occupations, are active in the labour force. Once these workers retire, optimal robot taxes are zero.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 279-311 |
| Number of pages | 33 |
| Journal | Review of Economic Studies |
| Volume | 89 |
| Issue number | 1 |
| DOIs | |
| State | Published - Jan 1 2022 |
Funding
We thank Bence Bardóczy, Gadi Barlevy, V.V. Chari, Bas Jacobs, and Nir Jaimovich, as well as Veronica Guerrieri and three anonymous referees for their comments.We thank Miguel Santana for excellent research assistance. Teles is thankful for the support of the FCT as well as the ADEMU project, "A Dynamic Economic and Monetary Union," funded by the European Union's Horizon 2020 Program under grant agreement 649396.
Keywords
- Automation
- Inequality
- Optimal taxation
- Robots
ASJC Scopus subject areas
- Economics and Econometrics
