Effects of a capital-use tax and automation subsidy in a model of innovation and automation

Daiki Maeda, Takaaki Morimoto, Takumi Motoyama and Yuki Saito

Journal of Economic Behavior & Organization, 2025, vol. 238, issue C

Abstract: To examine the effects of a capital-use tax and automation subsidy on the proportion of automated industries and the inequality between workers and capitalists, we formulate a Schumpeterian growth model with automation, innovation, and human capital accumulation. We analytically show that a higher capital-use tax drives down the wage rate and stimulates automation on the balanced growth path, whereas a reduction in automation subsidies lowers the wage rate but inhibits automation. Moreover, we conduct a quantitative analysis demonstrating that policies that inhibit automation do indeed reduce wages; nevertheless, however, they can address the disparity between workers and capitalists.

Keywords: Automation; Human capital; Inequality; Schumpeterian growth (search for similar items in EconPapers)
JEL-codes: E20 O31 O38 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:238:y:2025:i:c:s0167268125003737

DOI: 10.1016/j.jebo.2025.107254

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