Automation, automatic capital returns, and the functional income distribution

Casas, Pablo; Torres, José L.

doi:10.1080/10438599.2021.1891659

Cited by 7 publications

(10 citation statements)

References 56 publications

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“…Working with the novel paradigm of task-based production complements a strand of studies that concentrate on the substitution of labor with capital, expanding on the modeling of Tinbergen's race of skill and technological progress, coined as "the canonical model" by Acemoglu and Autor (2011). In this strand, skill-biased technological progress is conceptualized via a, possibly nested, CES production function on (often skill and unskilled) labor, capital and/or robots; for example, Kotlikoff and Sachs (2012), Berg et al (2018), Lin and Weise (2019), Benzell et al (2019), Prettner and Strulik (2020), Torres and Casas (2022), and Gasteiger and Prettner (2022).…”

Section: Related Literaturementioning

confidence: 99%

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Frictions and the diffusion of automation

Charalampidis

2023

The Manchester School

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This paper studies the implications of business cycle frictions for the diffusion of permanent changes in automation. Incorporating task‐based production in different versions of the New Keynesian model reveals considerable short‐run implications. Price‐distorting nominal rigidities amplify the labor displacement and attenuate the productivity and welfare gains of automation during the transition to the new equilibrium. They exacerbate the falls in the labor income share, the job finding probability, the value of long‐term contracts, and labor market tightness. The inflation response follows a J‐curve. Frictions in capital supply and wage rigidities amplify the labor displacement and attenuate the productivity gains too.

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Section: Related Literaturementioning

confidence: 99%

“…(2018), Lin and Weise (2019), Benzell et al. (2019), Prettner and Strulik (2020), Torres and Casas (2022), and Gasteiger and Prettner (2022).…”

Section: Introductionmentioning

confidence: 99%

Frictions and the diffusion of automation

Charalampidis

2023

The Manchester School

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“…For additional information about the characteristics of the production function, seeCasas and Torres (2021) …”

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confidence: 99%

Government size and automation

Casas,

Torres

2024

Int Tax Public Finance

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This paper explores the consequences of automation for public finance. We find that as the automation rate increases, the government size, measured as the fiscal revenues to output ratio, declines due to the substitution of traditional inputs which bear the burden of taxes by the new automatic technology. These results are explained by the effects of automation on labor, where taxation of labor income (including social security contributions) represents the most important source of fiscal revenues in most advanced economies. The paper performs two additional counterfactual experiments. First, we calculate how individual tax rates should be changed in response to automation in order to keep constant fiscal revenues from the different sources of taxes. However, this experiment reveals that this fiscal policy would have significant harmful effects on output and labor, and that a deep reform of the current tax mix is compulsory to offset the effects of automation on public finance. Second, we calculate the tax rate on capital, without modifying the other tax rates, required to keep constant the size of the government, resulting in a capital income tax rate of around 0.77 for an automation rate of 45%.

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“…This section presents the model specifying two separated technological frameworks, the households' maximization problem and the government's budget. As technological frameworks, we consider the most widely extended approach in the literature arguing that new autonomous capital exclusively replaces human labor and the approach exposed in Casas and Torres (2023) arguing that new autonomous capital replaces both human labor and traditional capital.…”

Section: The Modelmentioning

confidence: 99%

“…In particular, we examine how total tax revenues, including social security contributions, evolve with automation in the long run. In order to carry out this analysis, we use the automation model by Casas and Torres (2023), extended with taxes. Using the steady-state solution of the calibrated model, we carry out three experiments to explore how tax revenues evolve as the new autonomous technology spread through the economy.…”

Section: Introductionmentioning

confidence: 99%

The economic impact of autonomous technologies and a model for the circular economy

Casas-Aljama

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This dissertation offers a comprehensive analysis of the wide-ranging economic implications and labour market consequences of autonomous technologies, while also considering the role of the circular economy in sustaining economic growth. Spanning three thematic areas across nine self-contained essays, the research provides a combination of macroeconomic modelling and microeconomic evidence. The thesis is divided into three main parts, leaving aside the introduction and the concluding remarks. The first part focuses on macroeconomic theoretical modelling of a dual traditional-autonomous economy, employing dynamic general equilibrium models to evaluate the impact of autonomous technologies on the economy. The second part provides microeconomic evidence regarding the influence of autonomous technologies on labour markets. Finally, the third part presents a novel perspective on the integration of circular economy concepts into a neoclassical dynamic general equilibrium model. The thesis initiates its exploration through the lens of a dual traditional-autonomous economy model to study the economic implications of automation, discovering that the effects are largely determined by the adoption rate of autonomous capital and its elasticity of substitution with traditional technology. A significant finding suggests the existence of an adoption rate threshold, beyond which the process of automation can lead to a complete shift from traditional capital and labour. Furthermore, the study uncovers the necessity for a profound reform of current tax systems by observing a reduction in the government’s size due to the substitution of traditional tax-bearing inputs with autonomous technology. Further exploration into the optimal tax policy for maintaining the social security contributions to GDP ratio by taxing autonomous capital suggests that a robots’ social security tax paid by employers of autonomous capital is the most efficient long-term strategy. The dissertation then pivots to provide microeconomic evidence, examining the impact of digitalization on labour markets, using data from the US and European countries. The research provides a view of the effects of digitalization on the US employment landscape, presenting mappings that classify occupations based on their relationship with automation and AI. The study also investigates the implications of the automation process and AI on early retirement decisions across 26 European countries, revealing a significant role of technological change in these decisions. Moreover, this part analyses the role of computerization, AI, machine learning, and occupational reorganization capacity in unemployment probabilities among older workers, indicating the heterogeneity in the impact of new technologies on the labour market. Finally, this section explores the implications of digitalization for worker mobility, illustrating a significant influence on the relocation of displaced workers. Finally, the thesis presents a novel mathematical description of a circular economy by incorporating the concept into a neoclassical dynamic general equilibrium linear economy model. The study reveals a positive S-shaped relationship between the optimal recycling rate and economic development, concluding that increasing the circularity of the economy is a necessary condition for enhancing social welfare in a growing economy. Overall, the dissertation presents a comprehensive examination of the broad economic impacts of autonomous technologies, while introducing the concept of the circular economy into macroeconomic modelling. The findings have important implications for policy-making, contributing to a better understanding of the technology-driven economic changes.

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Automation, automatic capital returns, and the functional income distribution

Cited by 7 publications

References 56 publications

Frictions and the diffusion of automation

Frictions and the diffusion of automation

Government size and automation

The economic impact of autonomous technologies and a model for the circular economy

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