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Mr. Andrew Berg, Lahcen Bounader, Nikolay Gueorguiev, Hiroaki Miyamoto, Mr. Kenji Moriyama, Ryota Nakatani, and Luis-Felipe Zanna
Many studies predict massive job losses and real wage decline as a result of the ongoing widespread automation of production, a trend that may be further aggravated by the COVID-19 crisis. Yet automation is also expected to raise productivity and output. How can we share the gains from automation more widely, for the benefit of all? And what are the attendant equity-efficiency trade-offs? We analyze this issue by considering the effects of fiscal policies that seek to redistribute the gains from automation and address income inequality. We use a dynamic general equilibrium model with monopolistic competition, including a novel specification linking corporate power to automation. While fiscal policy cannot eliminate the classic equity-efficiency trade-offs, it can help improve them, reducing inequality at small or no loss of output. This is particularly so when policy takes advantage of novel, less distortive transmission channels of fiscal policy created by the empirically observed link between corporate market power and automation.
Mr. Andrew Berg, Lahcen Bounader, Nikolay Gueorguiev, Hiroaki Miyamoto, Mr. Kenji Moriyama, Ryota Nakatani, and Luis-Felipe Zanna

on Employment, Income Distribution, and Market Power C. Policy Impact to Address the Trade-off of Automation by Quantitative Models III. THE MODEL AND POLICY PACKAGES A. The Model B. Policy Packages IV. TRANSITION DYNAMICS OF A MODEL ECONOMY WITH POLICY PACKAGES A. Baseline B. Tax-and-Redistribute Group of Policy Packages C. Tax-and-Invest Group D. Non-Fiscal Measure Group V. COMPARING WELFARE ACROSS POLICY PACKAGES DURING TRANSITION A. Income and Inequality B. Disposable Income of the Two Types of Workers C. Equally Distributed Equivalent

Ms. Carmen Reinhart
The role of the international commodity market in transmitting disturbances is considered in a model that incorporates commodities as an input in production. The analysis employs a three-country framework: a liquidity-constrained commodity supplier and two industrial countries that import the commodity, export differentiated manufactured goods and hold the outstanding debt of the commodity exporter. In this setting the impact of changes in fiscal policy, commodity supplies, and the real interest rate are assessed. Particular attention is paid to the responses of the real exchange rate, commodity prices, and the international distribution of debt to the various shocks.
Ms. Carmen Reinhart

) ), leading to a decline in its output. Thus, the international transmission of a fiscal expansion in Country A is negative. Household consumption in all three countries declines. In the home country, output is higher but the higher taxes that finance the increase in spending reduce household disposable income. 6/ In the second industrial country, B, disposable income falls, owing to lower production and a deterioration in the terms of trade. The commodity exporter, also faces a deterioration in its terms of trade that reduces the value of its output, or put differently

Ms. Carmen Reinhart

. Thus, the international transmission of a fiscal expansion in country A is negative. Household consumption in the industrial countries declines. In the home country output is higher, but the higher taxes that finance the increase in spending reduce household disposable income. In the second industrial country, B, disposable income falls, owing to tower production and a deterioration in the terms of trade. The commodity exporting country also faces a deterioration in its terms of trade that reduces the value of its output, or alternatively expressed, that increases

Mr. Andrew Berg, Lahcen Bounader, Nikolay Gueorguiev, Hiroaki Miyamoto, Mr. Kenji Moriyama, Ryota Nakatani, and Luis-Felipe Zanna

to reduce inequality (the Gini) by 2.5 percentage points, depending on societal preferences. But other choices, with smaller decline in income level and less improvement in inequality, are still acceptable (i.e., not dominated by the robot tax) from the view of the trade-off. Without information on the society’s preference over income and inequality, we cannot further shorten the list. B. Disposable Income of the Two Types of Workers The second criterion focuses on the evolution of the disposable incomes of the two types of workers over time . The

International Monetary Fund

case of the household sector cover operating surplus, mixed income, compensation of employees, net property income received); ( b ) Disposable income, measured after allowing for current taxes on income, wealth, etc. and other current transfers, excluding social transfers in kind; and ( c ) Adjusted disposable income, measured after allowing for social transfers in kind. The magnitudes of these three concepts of income may differ widely at the level of the overall household sector. The differences between them are even greater for some types of

International Monetary Fund. Research Dept.
Trade liberalization in developing countries is frequently opposed on the grounds that, because it is likely to cause a deterioration in the external balance, it may not be a viable policy option for countries facing foreign exchange constraints. Recent literature suggests, however, an ambiguous relationship between tariff changes and the current account. This paper shows that if liberalization involves reducing tariffs on imported intermediate inputs (a reform that has figured prominently in developing countries), then the current account may improve or deteriorate, depending on the level of initial trade distortions and the structure of the economy.[JEL F13, F32, F41]