Suppress or let go? The time-varying roles of automation towards labor market

Abstract

It has been widely concerned that automation advancements may have imbalanced effects on the labor market, with the excessive unemployment of low-skill workers. To investigate the issue, we design and construct a general equilibrium model, embedded with different types of capital and labor, and a robot tax. The research suggests that it is effective to implement a robot tax to reasonably regulate the development of automation. However, further research shows a negative robot tax or an automation subsidy may be necessary in the long run, especially when considering the low birth rates and aging population. Empirical evidence proves the crowding out effect of automation on the employment of low- and middle-skilled labor, as well as the promotion effect of aging population on automation.