Economics Seminar- Özlem Kına

This paper provides a general equilibrium model that distinguishes between low-and high-skill automation and incorporates the two types of automation into a quantitative optimal taxation framework. Modelling the two types of automation is important as both are empirically relevant, and each has a different impact on wages of workers with different skill types. Low-skill automation increases wage inequality as it creates a downward pressure on low-skill wages, whereas high-skill automation tends to lower high-skill wages, hence it has the opposite effect on wage inequality. Results suggest that it is optimal to distort automation adoption in order to affect relative wages to provide redistribution.