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Should Robots be Taxed?

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  • Joao Guerreiro
  • Sergio Rebelo
  • Pedro Teles

Abstract

We use a model of automation to show that with the current U.S. tax system, a fall in automation costs could lead to a massive rise in income inequality. This inequality can be reduced by raising marginal income tax rates and taxing robots. But this solution involves a substantial efficiency loss for the reduced level of inequality. A Mirrleesian optimal income tax can reduce inequality at a smaller efficiency cost, but is difficult to implement. An alternative approach is to amend the current tax system to include a lump-sum rebate. In our model, with the rebate in place, it is optimal to tax robots only when there is partial automation.

Suggested Citation

  • Joao Guerreiro & Sergio Rebelo & Pedro Teles, 2017. "Should Robots be Taxed?," NBER Working Papers 23806, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23806 Note: EFG PE
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    1. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 175-208.
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    Cited by:

    1. Naudé, Wim & Nagler, Paula, 2017. "Technological Innovation and Inclusive Growth in Germany," IZA Discussion Papers 11194, Institute for the Study of Labor (IZA).
    2. Ahmed S. Rahman, 2017. "Rise of the Machines Redux – Education, Technological Transition and Long-run Growth," Departmental Working Papers 61, United States Naval Academy Department of Economics.
    3. Francesco Caselli & Alan Manning, 2017. "Robot Arithmetic: Can New Technology Harm All Workers or the Average Worker?," CEP Discussion Papers dp1497, Centre for Economic Performance, LSE.

    More about this item

    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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