Should Robots be Taxed?

Joao Guerreiro, Sergio Rebelo and Pedro Teles

Discussion by Lukas Mayr

November 17, 2017

The Paper

Routine Labor Non-Routine Labor

2

The Paper

Routine Labor Non-Routine LaborRobots

3

Decreasing costs of automation

Routine Labor Non-Routine Labor Robots

4

Tax robots ...

Routine Labor Non-Routine Labor Robots

5

... or let automation happen?

Non-Routine Labor Robots

6

Mirrleesian taxes

PropositionIn the optimal plan, when automation is incomplete (m < 1) robot taxesare strictly positive (τx > 0)

Increase in τx reduces the relative wage wn/wr

Makes non-routine worker less inclined to mimic the routine worker

???

Incentive compatibility constraint for non-routine workers

u(Cn)− v(Nn) ≥ u(Cr)− v(wrNr

wn

)

7

Mirrleesian taxes

PropositionIn the optimal plan, when automation is incomplete (m < 1) robot taxesare strictly positive (τx > 0)

Increase in τx reduces the relative wage wn/wr

Makes non-routine worker less inclined to mimic the routine worker

???

Incentive compatibility constraint for non-routine workers

u(Cn)− v(Nn) ≥ u(Cr)− v(wrNr

wn

)

7

Mirrleesian taxes

PropositionIn the optimal plan, when automation is incomplete (m < 1) robot taxesare strictly positive (τx > 0)

Increase in τx reduces the relative wage wn/wr

Makes non-routine worker less inclined to mimic the routine worker

???

Incentive compatibility constraint for non-routine workers

u(Cn)− v(Nn) ≥ u(Cr)− v(wrNr

wn

)

7

Mirrleesian taxes

PropositionIn the optimal plan, when automation is incomplete (m < 1) robot taxesare strictly positive (τx > 0)

Increase in τx reduces the relative wage wn/wr

Makes non-routine worker less inclined to mimic the routine worker

???

Incentive compatibility constraint for non-routine workers

u(Cn)− v(Nn) ≥ u(Cr)− v(wrNr

wn

)

7

Mirrleesian taxes

PropositionIn the optimal plan, when automation is incomplete (m < 1) robot taxesare strictly positive (τx > 0)

Increase in τx reduces the relative wage wn/wr

Makes non-routine worker less inclined to mimic the routine worker

???

Incentive compatibility constraint for non-routine workers

u(Cn)− v(Nn) ≥ u(Cr)− v(wrNr

wn

)

7

Routine Worker: Assembly Line Worker

8

Non-Routine Worker: Engineer

9

Example

Fabric worker (assembly-line work) and engineer

With τx = 0: wr = 10 USD/hour and wn = 40 USD/hour

⇒ Engineer gets 40 USD if he works an hour on the assembly line

With τx = 20%: wr = 15 USD/hour and wn = 30 USD/hour

⇒ Engineer gets 30 USD if he works an hour on the assembly line

⇒ Implicit assumption: Engineer always has the same marginalproductivity on the assembly line as he has with engineering

10

Example

Fabric worker (assembly-line work) and engineer

With τx = 0: wr = 10 USD/hour and wn = 40 USD/hour

⇒ Engineer gets 40 USD if he works an hour on the assembly line

With τx = 20%: wr = 15 USD/hour and wn = 30 USD/hour

⇒ Engineer gets 30 USD if he works an hour on the assembly line

⇒ Implicit assumption: Engineer always has the same marginalproductivity on the assembly line as he has with engineering

10

Example

Fabric worker (assembly-line work) and engineer

With τx = 0: wr = 10 USD/hour and wn = 40 USD/hour

⇒ Engineer gets 40 USD if he works an hour on the assembly line

With τx = 20%: wr = 15 USD/hour and wn = 30 USD/hour

⇒ Engineer gets 30 USD if he works an hour on the assembly line

⇒ Implicit assumption: Engineer always has the same marginalproductivity on the assembly line as he has with engineering

10

Example

Fabric worker (assembly-line work) and engineer

With τx = 0: wr = 10 USD/hour and wn = 40 USD/hour

⇒ Engineer gets 40 USD if he works an hour on the assembly line

With τx = 20%: wr = 15 USD/hour and wn = 30 USD/hour

⇒ Engineer gets 30 USD if he works an hour on the assembly line

⇒ Implicit assumption: Engineer always has the same marginalproductivity on the assembly line as he has with engineering

10

Example

Fabric worker (assembly-line work) and engineer

With τx = 0: wr = 10 USD/hour and wn = 40 USD/hour

⇒ Engineer gets 40 USD if he works an hour on the assembly line

With τx = 20%: wr = 15 USD/hour and wn = 30 USD/hour

⇒ Engineer gets 30 USD if he works an hour on the assembly line

⇒ Implicit assumption: Engineer always has the same marginalproductivity on the assembly line as he has with engineering

10

Example

Fabric worker (assembly-line work) and engineer

With τx = 0: wr = 10 USD/hour and wn = 40 USD/hour

⇒ Engineer gets 40 USD if he works an hour on the assembly line

With τx = 20%: wr = 15 USD/hour and wn = 30 USD/hour

⇒ Engineer gets 30 USD if he works an hour on the assembly line

⇒ Implicit assumption: Engineer always has the same marginalproductivity on the assembly line as he has with engineering

10

Mirrleesian taxes

Fixing the incentive compatibility constraint:

u(Cn)− v(Nn) ≥ u(Cr)− v(κNr)

κ is constant

Most sensible parameterization is κ = 1

⇒ Never tax robots!!!

11

Some additional remarks

Interesting and highly relevant question

Nice model set up with routine tasks as varieties

In Ramsey problems suddenly no informational problem anymore

HSV tax function but no transfers delivers result of no fullautomation and positive optimal robot taxes almost by assumption

o Not sure if this is really the appropriate status quoo There are at least some government transfers

Endogenous human capital formation

o Keeping demand for routine workers high by taxing robotsdiscourages human capital accumulation

12

Some additional remarks

Interesting and highly relevant question

Nice model set up with routine tasks as varieties

In Ramsey problems suddenly no informational problem anymore

HSV tax function but no transfers delivers result of no fullautomation and positive optimal robot taxes almost by assumption

o Not sure if this is really the appropriate status quoo There are at least some government transfers

Endogenous human capital formation

o Keeping demand for routine workers high by taxing robotsdiscourages human capital accumulation

12

Some additional remarks

Interesting and highly relevant question

Nice model set up with routine tasks as varieties

In Ramsey problems suddenly no informational problem anymore

HSV tax function but no transfers delivers result of no fullautomation and positive optimal robot taxes almost by assumption

o Not sure if this is really the appropriate status quoo There are at least some government transfers

Endogenous human capital formation

o Keeping demand for routine workers high by taxing robotsdiscourages human capital accumulation

12

Some additional remarks

Interesting and highly relevant question

Nice model set up with routine tasks as varieties

In Ramsey problems suddenly no informational problem anymore

HSV tax function but no transfers delivers result of no fullautomation and positive optimal robot taxes almost by assumption

o Not sure if this is really the appropriate status quoo There are at least some government transfers

Endogenous human capital formation

o Keeping demand for routine workers high by taxing robotsdiscourages human capital accumulation

12

Some additional remarks

Interesting and highly relevant question

Nice model set up with routine tasks as varieties

In Ramsey problems suddenly no informational problem anymore

HSV tax function but no transfers delivers result of no fullautomation and positive optimal robot taxes almost by assumption

o Not sure if this is really the appropriate status quoo There are at least some government transfers

Endogenous human capital formation

o Keeping demand for routine workers high by taxing robotsdiscourages human capital accumulation

12