Automation, Taxes and Transfers with International Rivalry

Rodney Tyers, Yixiao Zhou

Research output: Working paperDiscussion paper

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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.
Original languageEnglish
PublisherUWA Business School
Publication statusPublished - 2018

Publication series

NameEconomics Discussion Papers
No.7
Volume18

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