AUTOMATION, TAXES AND TRANSFERS WITH INTERNATIONAL RIVALRY

Rodney Tyers and Yixiao Zhou
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Yixiao Zhou: School of Economics, Finance and Property, Curtin University and Crawford School of Public Policy, The Australian National University

No 22-21, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: Observed declines in low-skill GDP shares and rising inequality have been widely linked to technology drives that, at least in some cases, are spurred by government assistance. We examine their global consequences, addressing distributional effects in an international context, using a six-region global macro model with multiple households. While tech advancement means “more for less” overall, the low-skilled are hurt by it and Pareto improvement requires compensatory policies. Desirability depends on whether welfare criteria are Rawlsian, Benthamite, capital friendly, or GDP maximizing. Even where automation introduces only bias, tech change is expansionary since it raises capital returns and attracts investment. Fostering it turns out to be a dominant strategy under all but the Rawlsian criterion. Under a post automation scenario with significant low-skill worker displacement, inequality-constraining but balance preserving fiscal interventions, such as tax-financed “earned income tax credits” 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 (search for similar items in EconPapers)
JEL-codes: C68 D33 F21 F42 O33 (search for similar items in EconPapers)
Pages: 33
Date: 2022
Note: MD5 = 319a0a99764198bfbf55cf75c09f8745
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Related works:
Working Paper: Automation, taxes and transfers with International rivalry (2018)
Working Paper: AUTOMATION, TAXES AND TRANSFERS WITH INTERNATIONAL RIVALRY (2018)
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