IDEAS home Printed from https://ideas.repec.org/a/oup/jeurec/v21y2023i3p1154-1190..html

Optimal Taxation of Robots

Author

Listed:
  • Uwe Thuemmel

Abstract

I study the optimal taxation of robots, other capital, and labor income. I show that it is optimal to distort robot adoption. The robot tax (or subsidy) exploits general-equilibrium effects to compress wages, which reduces income-tax distortions of labor supply, thereby raising welfare. In the calibrated model, when robots are expensive, a robot subsidy is optimal. As robots get cheaper, it becomes optimal to tax them. Yet, when reforming the status-quo tax system, most welfare gains can be achieved by adjusting the income tax. The additional gains from taxing robots differently from other equipment capital are close to zero.

Suggested Citation

  • Uwe Thuemmel, 2023. "Optimal Taxation of Robots," Journal of the European Economic Association, European Economic Association, vol. 21(3), pages 1154-1190.
    • Handle: RePEc:oup:jeurec:v:21:y:2023:i:3:p:1154-1190.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/jeea/jvac062
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. vom Lehn, Christian, 2020. "Labor market polarization, the decline of routine work, and technological change: A quantitative analysis," Journal of Monetary Economics, Elsevier, vol. 110(C), pages 62-80.
    2. Naito, Hisahiro, 1999. "Re-examination of uniform commodity taxes under a non-linear income tax system and its implication for production efficiency," Journal of Public Economics, Elsevier, vol. 71(2), pages 165-188, February.
    3. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
    4. Prettner, Klaus & Strulik, Holger, 2020. "Innovation, automation, and inequality: Policy challenges in the race against the machine," Journal of Monetary Economics, Elsevier, vol. 116(C), pages 249-265.
    5. Guido Matias Cortes, 2016. "Where Have the Middle-Wage Workers Gone? A Study of Polarization Using Panel Data," Journal of Labor Economics, University of Chicago Press, vol. 34(1), pages 63-105.
    6. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(3), pages 1039-1073.
    7. Berg, Andrew & Buffie, Edward F. & Zanna, Luis-Felipe, 2018. "Should we fear the robot revolution? (The correct answer is yes)," Journal of Monetary Economics, Elsevier, vol. 97(C), pages 117-148.
    8. Daron Acemoglu & Pascual Restrepo, 2018. "The Race between Man and Machine: Implications of Technology for Growth, Factor Shares, and Employment," American Economic Review, American Economic Association, vol. 108(6), pages 1488-1542, June.
    9. Carl Benedikt Frey & Thor Berger & Chinchih Chen, 2018. "Political machinery: did robots swing the 2016 US presidential election?," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 34(3), pages 418-442.
    10. Barth, Erling & Roed, Marianne & Schone, Pal & Umblijs, Janis, 2020. "How Robots Change Within-Firm Wage Inequality," IZA Discussion Papers 13605, IZA Network @ LISER.
    11. Loebbing, Jonas, 2020. "Redistributive Income Taxation with Directed Technical Change," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224606, Verein für Socialpolitik / German Economic Association.
    12. Naito, Hisahiro, 2004. "Endogenous human capital accumulation, comparative advantage and direct vs. indirect redistribution," Journal of Public Economics, Elsevier, vol. 88(12), pages 2685-2710, December.
    13. Casey Rothschild & Florian Scheuer, 2014. "A Theory of Income Taxation under Multidimensional Skill Heterogeneity," NBER Working Papers 19822, National Bureau of Economic Research, Inc.
    14. Zhang, Pengqing, 2019. "Automation, wage inequality and implications of a robot tax," International Review of Economics & Finance, Elsevier, vol. 59(C), pages 500-509.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Belloc, Filippo & Lofaro, Antonino, 2026. "Subsidies, new firms, and productivity in global manufacturing," International Journal of Industrial Organization, Elsevier, vol. 104(C).
    2. Yunmin Chen, 2024. "Optimal dynamic nonlinear income taxation with wage regulations," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(4), pages 1009-1036, August.
    3. Pablo Casas & Jos㉠L. Torres, 2026. "Automation, Taxation, and Social Security Sustainability," Hacienda Pública Española / Review of Public Economics, IEF, vol. 256(1), pages 69-104, March.
    4. Bloom, David E. & Prettner, Klaus & Saadaoui, Jamel & Veruete, Mario, 2025. "Artificial intelligence and the skill premium," Finance Research Letters, Elsevier, vol. 81(C).
    5. Maeda, Daiki & Morimoto, Takaaki & Motoyama, Takumi & Saito, Yuki, 2025. "Effects of a capital-use tax and automation subsidy in a model of innovation and automation," Journal of Economic Behavior & Organization, Elsevier, vol. 238(C).
    6. Zhang, Jingting & Shi, Zhiru, 2025. "Suppress or let go? The time-varying roles of automation towards labor market," Structural Change and Economic Dynamics, Elsevier, vol. 74(C), pages 158-174.
    7. Jakub Growiec & Klaus Prettner & Maciej Szkr'obka, 2026. "Redistributive Policies for the Times of Transformative AI," Papers 2609.14750, arXiv.org.
    8. Holtmann, Svea & Braun, Anna-Sophie & Cho, Jae & Koch, Reinald & Langenmayr, Dominika, 2025. "Investment effects of a quasi-robot tax: Evidence from South Korea," arqus Discussion Papers in Quantitative Tax Research 308, arqus - Arbeitskreis Quantitative Steuerlehre.
    9. Pablo Casas & José L. Torres, 2024. "Government size and automation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(3), pages 780-807, June.
    10. Nakatani, Ryota, 2024. "Optimal Taxation in the Automated Era," MPRA Paper 121347, University Library of Munich, Germany.
    11. Lehr, Nils H. & Restrepo, Pascual, 2026. "The price of intelligence: How should socially-minded firms price and deploy AI?," Journal of Monetary Economics, Elsevier, vol. 157(C).
    12. John Gilbert & Onur A. Koska & Reza Oladi, 2026. "Tariffs, taxes and wages in the age of artificial intelligence," Economic Inquiry, Western Economic Association International, vol. 64(2), pages 395-408, April.
    13. Been‐Lon Chen & Fei‐Chi Liang, 2026. "Technical change, wage inequality, and optimal taxes in an assignment model," Quantitative Economics, Econometric Society, vol. 17(1), pages 200-253, January.
    14. Ana Abeliansky & Klaus Prettner & Ernesto Rodríguez Crespo, 2024. "Climate change and automation: the emission effects of robot adoption," Department of Economics Working Papers wuwp370, Vienna University of Economics and Business, Department of Economics.
    15. NAKATANI, Ryota & MIYAMOTO, Hiroaki, 2026. "Optimal Taxation in the Automation Era," CIS Discussion paper series 710, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    16. Matthew O. Jackson & Zafer Kanik, 2026. "The Economic Benefits and Costs of AI and Policies to Mitigate AI's Impact on Inequality," Papers 2607.01101, arXiv.org, revised Jul 2026.
    17. Vesely, Stepan & Amaris, Gloria, 2025. "AI-driven income inequality and preferences for redistribution," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 642-648.
    18. Li, Jianjun & Wu, Zhouyi & Yu, Kaijia & Zhao, Wei, 2024. "The effect of industrial robot adoption on firm value: Evidence from China," Finance Research Letters, Elsevier, vol. 60(C).
    19. Aronsson, Thomas & Bastani, Spencer & Tayibov, Khayyam, 2025. "Redistribution and labor market inclusion," Working Paper Series 2025:19, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    20. Kim, Taehoon & Jung, Hoyong, 2026. "Industrial robotisation and local taxes: Evidence from South Korea," Technology in Society, Elsevier, vol. 84(C).
    21. Duha T. Altindag & Reem El Cheikh Taha & John M. Nunley & R. Alan Seals, 2026. "Robots and the Public Finance of Disability Insurance," Papers 2607.02892, arXiv.org.
    22. Nakatani, Ryota, 2022. "Optimal fiscal policy in the automated economy," MPRA Paper 115003, University Library of Munich, Germany.
    23. Furgasė Jevgenija & Miceikienė Astrida, 2024. "Reforming Labour Taxation: Addressing the Employment Effects of Technological Progress," Management Theory and Studies for Rural Business and Infrastructure Development, Paradigm, vol. 46(4), pages 592-608.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kudoh, Noritaka & Miyamoto, Hiroaki, 2025. "Robots, AI, and unemployment," Journal of Economic Dynamics and Control, Elsevier, vol. 174(C).
    2. Jurkat, Anne & Klump, Rainer & Schneider, Florian, 2025. "Robots and wages: A meta-analysis," Structural Change and Economic Dynamics, Elsevier, vol. 75(C), pages 541-567.
    3. Thomas Kurer & Nikolas Schöll, 2021. "How Technological Change Affects Regional Electorates," Working Papers 1269, Barcelona School of Economics.
    4. Harry Moroz & Mariana Viollaz, 2024. "The Future of Work in Central America and the Dominican Republic," World Bank Publications - Reports 42043, The World Bank Group.
    5. Uwe Thuemmel, 2018. "Optimal Taxation of Robots," CESifo Working Paper Series 7317, CESifo.
    6. NAKATANI, Ryota & MIYAMOTO, Hiroaki, 2026. "Optimal Taxation in the Automation Era," CIS Discussion paper series 710, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    7. Oscar Afonso & Rosa Forte, 2023. "How powerful are fiscal and monetary policies in a directed technical change model with humans and robots?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 3008-3032, July.
    8. Zhang, Jingting & Shi, Zhiru, 2025. "Suppress or let go? The time-varying roles of automation towards labor market," Structural Change and Economic Dynamics, Elsevier, vol. 74(C), pages 158-174.
    9. Kenichiro Ikeshita & Hideaki Uchida & Tamotsu Nakamura, 2023. "Automation and economic growth in a task‐based neoclassical growth model," Metroeconomica, Wiley Blackwell, vol. 74(4), pages 908-927, November.
    10. Nakatani, Ryota, 2024. "Optimal Taxation in the Automated Era," MPRA Paper 121347, University Library of Munich, Germany.
    11. Shohei Momoda & Takayuki Ogawa & Ryosuke Shimizu, 2024. "Automation and Growth Patterns in an Open Economy," KIER Working Papers 1109, Kyoto University, Institute of Economic Research.
    12. Lu, Chia-Hui, 2025. "Automation and job polarization," Journal of Macroeconomics, Elsevier, vol. 84(C).
    13. Matthew Ross, 2021. "The Effect of Intensive Margin Changes to Task Content on Employment Dynamics over the Business Cycle," ILR Review, Cornell University, ILR School, vol. 74(4), pages 1036-1064, August.
    14. Venturini, Francesco, 2022. "Intelligent technologies and productivity spillovers: Evidence from the Fourth Industrial Revolution," Journal of Economic Behavior & Organization, Elsevier, vol. 194(C), pages 220-243.
    15. Deng, Liuchun & Müller, Steffen & Plümpe, Verena & Stegmaier, Jens, 2024. "Robots, occupations, and worker age: A production-unit analysis of employment," European Economic Review, Elsevier, vol. 170(C).
    16. Krenz, Astrid & Strulik, Holger, 2025. "Automation and the fall and rise of the servant economy," European Economic Review, Elsevier, vol. 172(C).
    17. Ana L. Abeliansky & Klaus Prettner & Roman Stoellinger, 2023. "Infection Risk at Work, Automatability, and Employment," Department of Economics Working Papers wuwp352, Vienna University of Economics and Business, Department of Economics.
    18. Jaimovich, Nir & Saporta-Eksten, Itay & Siu, Henry & Yedid-Levi, Yaniv, 2021. "The macroeconomics of automation: Data, theory, and policy analysis," Journal of Monetary Economics, Elsevier, vol. 122(C), pages 1-16.
    19. Clément Bosquet & Paul Maarek & Elliot Moiteaux, 2021. "Routine-biased technological change and wages by education level: Occupational downgrading and displacement effects," Working Papers hal-03270715, HAL.
    20. Qichun He & Xin Yang & Heng-fu Zou, 2024. "Money, Growth, and Welfare in a Schumpeterian Model with Automation," CEMA Working Papers 640, China Economics and Management Academy, Central University of Finance and Economics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:jeurec:v:21:y:2023:i:3:p:1154-1190.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/jeea .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.