Can taxes raise output and reduce inequality? The case of lobbying

Abstract

Since the 1970s, income inequality has been increasing in most industrialized countries (Atkinson, Piketty, &

The Race between Man and Machine: Implications of Technology for Growth, Factor Shares, and Employment

“…Interestingly, if new tasks generate larger productivity gains than automation, this transition process will also be associated with a slowdown in productivity growth because automation crowds out resources that could be used to develop new tasks. 32 In summary, Proposition 6 characterizes the different types of BGPs, and together with Corollary 2, it delineates the types of changes in technology that trigger self-correcting dynamics. Starting from the interior BGP, the effects of (small) increases in automation technology will reverse themselves over time, restoring employment and the labor share back to their initial values.…”

“…We parametrize these productivities as follows. 32 Forgone productivity gains from slower creation of new tasks will exceed the gains from automation, causing a productivity slowdown during a transition to a higher level of automation, if ρ > ρ P , where ρ P is defined implicitly as the solution to the equation 1 33 As in Figure 1, this figure partials out the demographic composition of employment in each occupation at the beginning of the relevant period. See online Appendix B for the same relationship without these controls as well as with additional controls.…”

Individualself‐controland collective outcomes: An examination of cigarette addiction and taxes

“…However, our finding is consistent with the standard consumer intuition that consumers prefer paying less for their desired good. Finally, our theoretical results suggest intriguing open questions surrounding the impact of individual‐level behavioral problems and collective policy outcomes, related to the line of work initiated by Bisin et al (2015), Lizzeri and Yariv (2017), as well as Prettner and Rostam‐Afschar (2020), among others.…”

“…The authors conclude that an appropriate policy response in such situations is to reduce the tax burden and focus on reducing corruption. Prettner and Rostam‐Afschar (2020) present a framework for assessing the impact of lobbying on taxes’ ability to affect output and inequality. The authors develop a model that highlights lobbying as a channel for reducing inequality while raising GDP.…”

The effects of automation and lobbying in wage inequality: a directed technical change model with routine and non-routine tasks

“…2 For instance, Autor (2014) considers that, besides market conditions, increasing political capture of the policy-making process by elites may also affect inequality. Prettner and Rostam-Afschar (2020) argue that a more stringent tax policy that relocates resources from unproductive lobbying with the objective of rent-seeking to productive activity contributes to higher economic growth and lower inequality. Lesica (2018) shows that lobbying can influence policymakers to set the minimum wage according to the ideology of the former provided that labor demand is sufficiently elastic.…”