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Workers’ incentives and the optimal taxation of AI

Author

Listed:
  • Growiec, Jakub
  • Prettner, Klaus
  • Szkróbka, Maciej

Abstract

We characterize the optimal tax policy in an economy with human manual and cognitive labor, physical capital, and artificial intelligence (AI). Extending the dynamic taxation setup of Slavík and Yazici (2014), we find that it is optimal to start taxing AI once cognitive workers find themselves at a disadvantage in the labor market relative to manual workers. This threshold may be crossed once AI becomes sufficiently capable in substituting humans across cognitive tasks.

Suggested Citation

  • Growiec, Jakub & Prettner, Klaus & Szkróbka, Maciej, 2026. "Workers’ incentives and the optimal taxation of AI," Economics Letters, Elsevier, vol. 266(C).
    • Handle: RePEc:eee:ecolet:v:266:y:2026:i:c:s0165176526002569
    DOI: 10.1016/j.econlet.2026.113062
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    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • 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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