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Automation, Taxes And Transfers With International Rivalry

Author

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  • Rod Tyers

    (Business School, University of Western Australia and Research School of Economics, Centre for Applied Macroeconomic Analysis (CAMA), Australian National University)

  • Yixiao Zhou

    (School of Economics, Finance and Property, Curtin University and Crawford School of Public Policy, The Australian National University)

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.

Suggested Citation

  • Rod Tyers & Yixiao Zhou, 2022. "Automation, Taxes And Transfers With International Rivalry," Economics Discussion / Working Papers 22-21, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:22-21
    Note: MD5 = 319a0a99764198bfbf55cf75c09f8745
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    1. Rod Tyers & Yixiao Zhou, 2023. "Automation and inequality with taxes and transfers," Scottish Journal of Political Economy, Scottish Economic Society, vol. 70(1), pages 68-100, February.

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    More about this item

    Keywords

    Automation; income distribution; taxes; transfers; global modelling;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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