You Have Been Terminated: Robot Taxation and the Welfare State

Gizem Akar, Giorgia Casalone, Martin Zagler

Publication: Working/Discussion PaperWU Working Paper

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Abstract

We present a three sector OLG model with a homogenous output good that is produced with traditional or robot technology. The traditional sector produces with labor and capital, whereas the modern sector employs robots instead of labor. We find that little can prevent the ascent of a modern economy. In particular, whilst robots are perfect substitutes to labor in our model, it is only the ratio of robot to capital taxes that can influence the speed of transition. The robotics sector produces robots using the homogeneous output good. We find that wages fall with a relative increase in productivity in the modern sector and a decrease in market power of robot suppliers. Falling wages imply that consumption will fall through generations, and a utilitarian government would feel inclined to intervene. We present several welfare policies, from wage subsidies, unemployment benefits, pensions, to a universal basic income. We also show under which conditions, as the economy becomes fully roboterized, it will switch from an exogenous growth model based on TFP to an endogenous growth model due to constant returns with respect to reproducible factors of production.
Original languageEnglish
Place of PublicationVienna
PublisherWU Vienna University of Economics and Business
DOIs
Publication statusPublished - 2022

Publication series

NameWU International Taxation Research Paper Series
No.2022-05

WU Working Paper Series

  • WU International Taxation Research Paper Series

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