Automation, Taxes and Transfers with International Rivalry

59 Pages Posted: 21 Sep 2018

See all articles by Rod Tyers

Rod Tyers

Australian National University (ANU) - School of Economics; The University of Western Australia - Department of Economics

Yixiao Zhou

Australian National University (ANU) - Crawford School of Public Policy

Date Written: September 18, 2018

Abstract

Continued automation and declines in low-skill shares of GDP have been widespread globally and linked to inequality. We examine the long-term, global consequences of policies that foster automation or address the distributional consequences of it, using a six-region global macro model. Results depend on whether welfare criteria are Rawlsian, emphasizing the performance of low-skill households, Benthamite, which aggregate pecuniary measures, capital-owner friendly, or simply based on real GDP. Even where automation delivers only bias against the low skilled, we find that the fostering it is a dominant strategy under all but the Rawlsian criterion. We then consider a post automation scenario in which worker displacement is significant, examining inequality constraining but balance-preserving fiscal interventions, such as tax-financed “earned income tax credits”. These generate only small international spillover effects and are for the most part not preferred under all criteria except the Rawlsian one.

Keywords: Automation, income distribution, taxes, transfers, global modelling

JEL Classification: C68, D33, F21, F42, O33

Suggested Citation

Tyers, Rod and Zhou, Yixiao, Automation, Taxes and Transfers with International Rivalry (September 18, 2018). CAMA Working Paper No. 44/2018, Available at SSRN: https://ssrn.com/abstract=3251070 or http://dx.doi.org/10.2139/ssrn.3251070

Rod Tyers (Contact Author)

Australian National University (ANU) - School of Economics ( email )

Arndt Building
Australian National University
Canberra, Australian Capital Territory 0200
Australia
61-6-249-5124 (Fax)

The University of Western Australia - Department of Economics ( email )

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Crawley, Western Australia 6009
Australia
61 8 6488 5632 (Phone)

HOME PAGE: http://www.business.uwa.edu.au/school/staff-profiles?type=profile&dn=cn%3DRodney%20Tyers%2Cou%3DEcon

Yixiao Zhou

Australian National University (ANU) - Crawford School of Public Policy ( email )

7 Liversidge Street
Lennox Crossing
Canberra, ACT 0200
Australia

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