Deepening Automation and Wealth Inequality: An Intergenerational Perspective

Sammanfattning: The fast development of automation technology has been widely recognized as a key reason for the rising wealth inequality in the US since 1980s, and current literature focuses on the channel of increasing wage inequality triggered by deepening automation. This thesis contributes to the literature by examining the interaction between autonomation and an additional channel: cross-generation wealth accumulation via bequests. To study the problem, I develop an OLG model with time preference heterogeneity, and incorporate automation as a special form of capital in the production function. Specifically, I examined how the wealth inequality within a generation, specifically the wealth ratio between the rich and the poor, is affected by deepening automation and aging population, through the channel of bequests. A calibrated model to the US data suggests that bequests contribute to 15.6% of the present wealth inequality, and that doubling the productivity of automation capital increases the wealth inequality gap by 2%, while the output level is increased by 4%. Moreover, I examine how much a robot tax and a bequest tax can narrow the wealth inequality. The model predicts that a 10% increase in bequest tax rate can reduce the wealth ratio by 0.7%, which is about 5 times more effective than a 10% rise in robot tax rate. However, a bequest tax narrows wealth inequality at the cost of output level, while a low level of robot tax can help with both targets simultaneously.