Searching for Wage Growth: Policy Responses to the Robot Revolution

Andrew Berg, Edward Buffie, Mariarosaria Comunale, Chris Papageorgiou () and Luis-Felipe Zanna
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Edward Buffie: Indiana University
Luis-Felipe Zanna: International Monetary Fund

Review of Economic Dynamics, 2025, vol. 57

Abstract: The current wave of technological revolution is changing the way policies work. This paper examines the growth and distributional implications of cuts in the corporate tax rate and public investment in infrastructure and education in a neoclassical growth model with “robot†capital (a broad definition of robots, Artificial Intelligence, computers, big data, digitalization, networks, sensors and servos). We find that incorporating robot capital into the model makes a big difference to policy outcomes: the trickle-down effects of corporate tax cuts on unskilled wages are attenuated, and the advantages of investment in infrastructure, and especially in education, are bigger. Based on our calibrations, grounded in new empirical estimates, infrastructure investment and corporate tax cuts dominate investment in education in a “traditional†economy. However, in an economy with robots, infrastructure investment dominates corporate tax cuts, while investment in education tends to produce the highest welfare gains of all. (Copyright: Elsevier)

Keywords: Technological change; Artificial Intelligence; robots; growth; income distribution; fiscal policy; public investment; education (search for similar items in EconPapers)
JEL-codes: E23 E25 O30 O40 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1016/j.red.2025.101286

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