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When Should Robots Be Subsidized?

Author

Listed:
  • Subhrasil Chingri

    (Indian Institute of Technology Delhi)

  • Debasis Mondal

    (Indian Institute of Technology Delhi)

  • Klaus Prettner

    (Department of Economics, Vienna University of Economics and Business)

Abstract

This paper studies optimal robot taxation in a static model with routine and non-routine workers. Robots substitute for routine workers and complement non-routine workers. In addition, robots are produced in a monopolistic sector that charges a markup over marginal cost. In the absence of monopoly power, the optimal robot tax rate is zero. When robot producers have monopoly power, the optimal policy corrects the markup distortion by aligning the effective robot price with marginal cost, conditional on the labor supply induced by the income tax system. The wage premium rises with the expansion of the tasks that robots can perform and declines with higher robot production costs. The results clarify the conditions under which robot taxation serves as a corrective instrument.

Suggested Citation

  • Subhrasil Chingri & Debasis Mondal & Klaus Prettner, 2026. "When Should Robots Be Subsidized?," Department of Economics Working Papers wuwp399, Vienna University of Economics and Business, Department of Economics.
    • Handle: RePEc:wiw:wiwwuw:wuwp399
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    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • 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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