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Automation, wage inequality and implications of a robot tax

Pengqing Zhang

International Review of Economics & Finance, 2019, vol. 59, issue C, 500-509

Abstract: To examine how automation affects the skilled-unskilled wage gap and whether robots should be taxed, this paper embeds the use of robots within the specific-factor framework. In the basic model, we show that an acceleration in automation generates the displacement effect and the capital reallocation effect. If the elasticity of substitution between labor and capital in the robot-producing sector is not too small (resp. is sufficiently small), then the capital reallocation effect cannot (resp. can) counteract the displacement effect and thus the wage gap will be expanded (resp. will be narrowed down). In the extended models, the results of the basic model will still hold when a labor union is introduced into the robot-using sector, but the wage gap will be unconditionally expanded when a regulated wage rate is introduced into that sector. In both the basic model and the extended models, a tax on robots will unambiguously narrow down the wage gap.

Keywords: Automation; Wage inequality; Robot taxation; General equilibrium approach (search for similar items in EconPapers)
JEL-codes: H23 J31 O33 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.iref.2018.10.013

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