Automation, inequality and macro policy
Date & time
The use of robots has been expanding rapidly. This development is associated with declines in low-skill labour shares and rises in inequality. The study takes a macroeconomic perspective in examining the impact of automation on inequality and the trade-offs between various macroeconomic policies for alleviating inequality. Using a stylised model of a national economy, the study finds that for both China and the US, since 1990s, biased technical change has contributed more to raising inequality than other factors. Prospective analysis of policy responses shows that an ‘earned income tax credit’ system financed from consumption taxes outperforms the ‘universal basic income’ type. Furthermore, automation and its policy responses are taking place in a global economy integrated via financial flows and trade, causing spill-overs to other nations. The study also constructs a six-region global macro model to examine implications of automation and the ways in which macro policy responses will interact across regions.
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